There are several ways to get money or financing. One of them is to use a car as collateral or, in other words, pawn the car. We tell you what you should know before using this credit formula.
pawning a car is obtain a personal loan using it as collateral or guarantee of payment. In other words, it is the vehicle that allows you to access a certain amount of money that you must return according to the conditions agreed with the entity that lends you the money.
Vehicle Pawn Types
There are two ways to pawn a vehicle with which to obtain money or financing in exchange. Choosing one or the other will depend on the conditions of the loan, as well as the right to use the vehicle.
pawn with custody
The entity grants a loan with real estate guarantee in which the car designated as payment guarantee remains in the possession of said entity until the loan has been paid in full.
This modality allows assigning a higher value to the vehicle, but also the payment of interest on the loan and the expenses derived from the custody of the vehicle.
non-custodial pawn
This modality allows access to the loan, but also continue to use the vehicle. Generally, this implies the payment of the fee associated with the loan, an amount for renting the vehicle and also the obligation to have comprehensive car insurance.
What is the process to pawn a car?
The process by which you can pawn your car is simple in most cases, although you will need to meet some requirements to be able to access it. mainly your car must be a maximum of 10 years old (or high-end) and have been paid in fullwithout loans or any other type of pending financing.
Once that is verified, the process is as follows:
- car valuation: the company will appraise the vehicle. The amount to lend will depend on each one, but it generally ranges between 50 and 80%.
- Presentation of the documentation: DNI, technical sheet with valid ITV, circulation permit, IVTM paid and vehicle accreditation free of charges and embargoes.
- Resolution of the feasibility study: if it is positive, the money is delivered, which must be returned in installments within the agreed time.
The option of pawning the car is not generally the most advisable and should only be used when there is no other option. The main argument against is that the money delivered will not cover the value of the vehicle. If you do not repay the loan, you will have lost the car for a much lower amount than what you would have obtained if you had sold it.
On the contrary, it is usually a viable option for people who they don’t have a payroll or are in default lists such as RAI or ASNEF and that, therefore, they cannot access financing in another way.
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