Equity is the difference between your car worth and the amount you owe your lender. It is the current amount that you own on your vehicle. If you have equity left in your car, it simply means that your car value is higher than the amount you owe your lender.
It requires simple arithmetic to calculate the equity in your car. Subtract the amount you owe your lender from the actual value of your car. So, if your car is worth $20,000 and your loan balance is $8,000, the equity in your car is $12,000. If you pay back your loan, you will have $20,000 equity because you no longer owe your lender.
If your car value is more than the outstanding balance you owe your lender, you have positive equity. If you owe your lender more than your car value, you have negative equity in your car.
How to use your car equity
If you have equity in your vehicle, it can serve as a financing option. Having equity in your car is a good way to get another loan from your lender. You can get a loan on your vehicle and use the cash from its equity to clear up another expense. Vehicle equity is similar to a home equity loan, but the value of your vehicle is used in this case. Vehicle equity is considered a great finance option because it has a low-interest rate compared to other loan types or credit cards.
• A new loan plan: Some financial institutions may accept to take the equity in your car to offer you a loan. In this case, you will be getting a car loan for the value of your vehicle, and you can use the money to take care of another expense. Using the equity in your vehicle in Chicago would require you to refinance the vehicle. It's a good thing when you have positive equity in your vehicle. It gives you the opportunity to cut down your high-interest debt since it has a lower interest rate.
• Financing a new car: When you repay your loan, the value of your car rises to be greater than the amount you owe, which puts you in a positive equity position. You can decide to use the equity in your current vehicle to finance your next car. Before the end of your financial plan, you can take the chance to get yourself a brand new car. Calculate your vehicle equity to know if you have enough to pay off your outstanding finance while you have some money left for a new car. https://www.tfctitleloans.com/amazing-car-title-loans-chicago-obtain-one/
• Title loans: this is a way to borrow against your vehicle. You give your vehicle as collateral to get some quick cash, especially in emergency situations. Title loans usually do not care if you have bad credit. Once you have some equity in your vehicle, you can get a loan.
When looking to use your vehicle as a financial product, it is important that you calculate your vehicle equity in order for you to know how much you can get from it.