Vehicle-secured loan: how does it work?

Not everything in life goes as planned and suddenly you find yourself needing money and don't know how to get it. Financial institutions are increasingly offering products for these purposes, and one of them is vehicle-secured loans. 

But just thinking about it is scary! Giving up your vehicle as a way to guarantee the loan will be paid off? Sounds a little scary…

However, this was the way that many people found to be able to pay off a debt at a given time, or meet any other need, through a loan. 

In this post, we want to help you better understand how secured loan works, so that you can clear up your doubts and understand whether or not it is the best option. 

Here you will read:

• What is a vehicle secured loan?
• How to take out a loan with vehicle collateral?
• Who offers loans secured by a vehicle?
• Can people with bad credit take out a loan secured by a vehicle?

What is a vehicle secured loan?

A vehicle-secured loan can be defined as a personal loan granted to the interested party, who uses their car, motorcycle, or any other vehicle they own as collateral for the payment of that debt. 

It can also be known as vehicle refinancing. 

Because there is something there representing the guarantee, in this case, the vehicle, the interest on this type of loan ends up being lower, which encourages many people to opt for this modality. 

However, there are already digital financial companies that offer personal loans with rates almost as low as this type of vehicle-secured loan, so it's important to do some research beforehand. 

How much can I get in a loan secured by a vehicle?

It's possible to get between 50% and 90% of the vehicle's value. This condition varies depending on the financial institution and the car's year of manufacture. In other words, the newer the car, the lower the interest rates and the better the value. 

It's worth noting that one of the requirements for this option is to have the vehicle in your own name and paid off. One advantage is that, under these conditions, even someone with a bad credit history can apply for the contract and have a chance of being approved. 

However, providing a vehicle as collateral doesn't guarantee that the financial institution will grant the loan. As with any other type of request, there's a preliminary analysis that includes certain requirements. Ultimately, the bank may still say no. 

How to take out a loan with vehicle collateral?

To take out a loan secured by a vehicle, first of all, you must have your own vehicle, in your name, in good condition, and in normal operation. 

One of the steps in analyzing this credit is an inspection of the vehicle, ensuring that it is suitable and that it also serves as a way of assessing how much the vehicle is worth, to then define the amount that can be offered in the form of credit. 

The car or motorcycle also cannot be alienated to any other condition. 

Required documents

To proceed with the loan application, banks request personal data such as ID, CPF, vehicle registration document (CRV), proof of address and proof of income. 

In some cases, the financial institution may request other documentation if deemed necessary. 

What if I don't pay back the loan?

Failure to pay a loan secured by a vehicle will result in the loss of the vehicle, which is already transferred to the bank from the moment the credit agreement is signed. 

Therefore, first of all, it is important to be aware of this and be sure that it will be possible to pay off this debt month after month, to avoid the risk of decapitalizing such an important and necessary asset. 

Who offers loans secured by a vehicle?

Many institutions offer vehicle-secured loans, both traditional and online. Some are:

Traditional

• Bank of Brazil
• Federal Savings Bank 
• Bradesco Bank

Online institutions

• Credits
• Lendico

These are just a few options among many. If this is a real need, it's worth researching the options, especially to check interest rates. 

Can people with bad credit take out a loan secured by a vehicle?

As mentioned previously, a person with a negative CPF is not prevented from proceeding with the loan application for this reason. The conditions are more tailored to the vehicle, in this case. 

Essential tips when taking out a loan

If you want to have good financial health and not be held hostage by banking institutions, it's crucial to follow some essential tips, whether you have loan debt or not. 

It's also important to think carefully before making a choice that could end up compromising your future, as is the case with this option.

A smart move is to analyze all possible options before making a decision, as well as checking how it will impact the coming days and months. 

• Spend only what you can afford
• Don't be fooled by high loan amounts, set your own limit and choose this option only if you can afford it.
• Think carefully before making a purchase: “Do I really need this?”
• Understand if your choices are made on impulse
• Have good financial planning
• Opt for a loan without abusive fees and with the greatest possible number of benefits
• And take advantage of the benefits that a loan can offer you and use it wisely! 

Did you like the content?

We hope your question has been answered. From now on, make the most of these two options! 

Take the opportunity to read too “Credit card or payroll loan: which is better?”.

Keep following our content and following these tips carefully chosen for you.