Choosing Between Using Your Home Or Car As Collateral

For those individuals who have a poor credit score and want to apply for a loan

, more often than not a lender will ask for some sort of collateral to secure their lending risks. In most cases, the collateral will be either your home or your car depending upon the type of loan you have applied for. However, many individuals are confused whether it makes more sense to use your home as the collateral or your car. As far as we are concerned, your car is the only asset which you should consider for loan applications and using your home is filled with too many negatives. The top 3 reasons why using your car will always make more sense is as follows:

1) Loans such as auto title loans where you get cash in exchange of the title of your car, process loan applications quite quickly. In fact in most cases it takes only about 24 to 48 hours to process and disburse the cash. If you use your home as collateral, it takes a lot of time for your lender to conduct a proper house appraisal and then figure out the maximum loan amount you can qualify for. It is a time consuming process and it does not work if you are in urgent need of cash. Also when it comes to auto title loans, you can use any vehicle you own which could be a car, truck or even a mobile home.

2) If you have a poor credit score, then a lot of lenders who use homes as collateral will shy away. Some would require you to meet a minimum financial requirement and at the same time use your home as collateral before they can approve your loan application. On the other hand, auto title loans are much easier to obtain. Lenders who deal in such types of loans are more open than others to work with individuals who have a poor credit score and often only look at the type of vehicle you own and its age before approving your loan application. Auto title loans in fact are the preferred form of loan for those who have a bad credit score.

3) Just in case you end up in the worst case scenario where you acquire a loan and then default on it month after month, it is easier to part with your car than your entire home. Imagine using your home as collateral and then defaulting continuously on your loan. You will end up creating a huge financial burden for your family and possibly make them homeless. However, even in a worst case scenario, losing your car has far less repercussions than losing your entire home.

by: Martin Lander

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