Last Updated on June 16, 2021 by Jason Mason
When looking for a used car at your local dealer, you may come across one that looks great but has a ‘salvage’ title attached to it. If you’re wondering what that is, then salvage title is an indicator that the car has been damaged to a large extent. It can either be because it met an accident or a calamity like fire or flood and was impaired severely. These types of cars are often titled as salvaged because they are considered as unfit for the road. The insurance company discloses that the car is not worth the repair and gives it to a junkyard.
This car is then repaired and made in to a drivable condition. However, the salvage title still remains. So when you purchase a car like this, it is often quite difficult if not impossible to get a loan for it. The reason is that banks do not want to finance cars that have a higher risk of loss. And if a lender or bank decides to finance it for you, there may be a comprehensive insurance policy that can come as another challenge ahead.
Here Are Some Ways to Get the Loan
Although it may be a little tough to get a loan for a salvage titled car, here are a few ways that you can use to find a lender or insurance company that’ll readily grant you a loan.
Look For A Bank
Since the big banks are probably not going to lend you for a salvaged car, you can rather look for a small bank or credit union that can do the job. There are a lot of banks that have broadened the consumer lending practise just so they can compete with the big banks. So searching for such a bank may land you a loan you never expected. There are also various speciality lenders that may provide you with finances for unique circumstances. So you can try getting a loan for your salvage titled car from such lenders.
However, you should be mindful that the interest rates of such loans are going to be way higher than the normal loans because of the risk attached to the vehicle.
Use Your Contacts
When it comes to getting a loan, what’ll really help you is a good relationship with the bank mates, and a great credit score will just be like cherry on the cake! Having a good track record with the bank or lenders will just increase your chances of getting the loan easily. So begin by asking the bankers in your contact list or even schedule a meeting with them to get a loan, maybe you can land a great deal.
Don’t Miss The Documents
When looking for loans for your salvage titled car, it is important to back your application with some documents. Providing comprehensive documents about the total damage of the car can give a broader insight about the car’s condition to the lender or insurer. This can basically determine whether or not your loan will be approved. If the car has a lower degree of damage, you will likely get a loan approved in a short period of time.
Important papers you shouldn’t forget include the original damage estimates and additional repairs receipts. The additional repair indicates that the vehicle is maintained and thus reduces the risks on the insurer.
An Indirect Loan May Help
If you’re still finding it difficult to get loan from the lenders or bankers, or the interest rate and full coverage cost is higher, you can consider getting an indirect loan for the vehicle. For instance, you can withdraw funds from a home equity line of credit to pay for your car. You can then pay back the borrowed money from the line of credit over a period of time.
Choosing an indirect loan can be one cost effective solution for your salvaged car. Besides, you get lower interest rate and a low cost liability policy.
Another Alternative – Getting the Car Rebuilt
Getting loan for a salvage titled car can get quite tedious, especially because one insurance company has already titled the car as not worth driving. So it won’t come as a shocker if others too think of it that way. The main fact here is that the car has a very high risk because of the damages it has retained. Besides, financing a car that has not been rebuilt to a better condition may less likely land you any loan at all. However, if you get the car repaired and make all the necessary parts replacements, then getting it inspected and re-classified as ‘rebuilt’ will increase the chances of getting financing from banks.
Once you’ve rebuilt the car, you can seek a loan from banks. The main thing here is to prove to the insurers or lenders that your car has been rebuilt into a very good condition and is safe to be driven on the roads. For this, you can hire an experienced and certified mechanic who will check your entire vehicle and issue a report for the vehicle. You can also ask the seller about the repair receipts for the car. It’s obvious, if they’re selling a car, they will definitely have a report. If they don’t, then you must reconsider purchasing the car for yourself.
Although it might be a little difficult to get a loan for a salvage titled car, you can still easily get one if you use the right strategies and pitch in the lenders. However, it is important to assess the car first and also get a VIN check report done. If the reports are good and there are no signs of major damage to the car, then not only will it be great for you, but you will also find it easy to get a loan. However, if you do find a car that doesn’t look too good, you can still get it repaired and issue a rebuilt license to get the car financed.