Auto Equity Loan Calculator

What Is an Auto Equity Loan?

An auto equity loan is a type of secured loan that allows you to borrow money using the equity in your vehicle as collateral. Vehicle equity is the difference between your car's current market value and the amount you still owe on any existing auto loan. If your car is worth $20,000 and you owe $12,000 on your loan, you have $8,000 in equity. An auto equity lender may allow you to borrow against some or all of that equity.

Auto equity loans are also sometimes called car equity loans or vehicle equity loans. They should not be confused with auto title loans, which are a different and often predatory product. Auto equity loans from reputable lenders come with structured repayment terms, competitive interest rates, and consumer protections that title loans typically lack. Use the calculator above to determine how much equity you currently have in your vehicle and what your borrowing options might look like.

How Auto Equity Loans Work

The auto equity loan process begins with the lender assessing your vehicle's current fair market value. This is typically done using industry valuation tools like Kelley Blue Book, Edmunds, or NADA Guides. The lender then subtracts any outstanding loan balance to determine your available equity.

Most auto equity lenders will lend between 70% and 100% of your available equity, although some may go as high as 125% of the vehicle's value for borrowers with excellent credit. The loan-to-value (LTV) ratio is a key underwriting factor. A lower LTV means less risk for the lender and typically results in a lower interest rate for you.

Once approved, you receive the loan funds as a lump sum. The lender places a lien on your vehicle title, meaning they have a legal claim on the car until the loan is repaid. You continue to drive and use the vehicle normally, but you cannot sell it without first paying off the auto equity loan. Monthly payments are fixed and include both principal and interest, following a standard amortization schedule.

The loan term for auto equity loans typically ranges from 12 to 60 months, depending on the amount borrowed and the lender's policies. Interest rates are generally lower than unsecured personal loans because the vehicle secures the debt, but they are higher than traditional auto purchase loans because the lender is taking a second-lien position on a depreciating asset.

Auto Equity Loan vs. Title Loan vs. Personal Loan

Understanding the differences between these three loan types is critical for making a smart borrowing decision:

Auto equity loans are offered by banks, credit unions, and reputable online lenders. They require a credit check, have structured repayment terms (typically 12 to 60 months), and charge interest rates that range from about 6% to 18% APR depending on your creditworthiness. The vehicle must have positive equity, and the lender places a lien on the title. These loans are regulated by federal and state consumer protection laws.

Title loans are a very different product. They are offered by specialty lenders, often found in storefronts, and typically do not require a credit check. Instead, you hand over your physical vehicle title. Title loans are short-term (usually 15 to 30 days), carry extremely high interest rates (often 100% to 300% APR or more), and are designed to be rolled over repeatedly, trapping borrowers in a cycle of debt. The CFPB has identified title loans as one of the most predatory consumer lending products, with roughly one in five title loan borrowers having their vehicle repossessed.

Personal loans are unsecured, meaning no collateral is required. Because the lender takes on more risk, interest rates are typically higher than auto equity loans, ranging from 8% to 36% APR. However, there is no risk of losing your vehicle if you default. Personal loans make sense when you do not have sufficient vehicle equity, when you prefer not to put your car at risk, or when the loan amount you need exceeds your available equity.

In most cases, if you have sufficient vehicle equity and good credit, an auto equity loan offers the best combination of low rates and accessible borrowing amounts. If you are considering options, always avoid title loans due to their predatory terms and explore credit union personal loans as an alternative.

How Much Can You Borrow with an Auto Equity Loan?

The amount you can borrow depends on several factors, including your vehicle's market value, your outstanding loan balance, the lender's maximum LTV ratio, and your creditworthiness.

Calculate your equity first. Use the calculator above to enter your vehicle's current value and your remaining loan balance. The difference is your equity. For example, if your car is valued at $25,000 and you owe $10,000, your equity is $15,000.

Apply the lender's LTV limit. If the lender offers up to 80% of your equity, you could borrow up to $12,000 in the example above. Some lenders may allow higher LTV ratios for borrowers with excellent credit scores (typically 740 or above).

Factor in your debt-to-income ratio. Even if you have substantial equity, lenders will evaluate your ability to repay. Most lenders prefer a total debt-to-income (DTI) ratio below 40% to 45%. If your existing monthly obligations already consume a large portion of your income, you may be approved for less than your full available equity.

Vehicle age and condition matter. Lenders are more willing to lend against newer vehicles in good condition because they hold their value better. A car that is more than 10 years old or has high mileage may qualify for a lower LTV ratio or may not be accepted at all by some lenders.

Keep in mind that just because you can borrow a certain amount does not mean you should. Borrowing against your vehicle adds risk. If you cannot make the payments, you could lose your car. Only borrow what you truly need, and make sure the monthly payment fits comfortably within your budget. To see how extra payments could help you pay off this loan faster, check out our loan payoff calculator.

Pros and Cons of Auto Equity Loans

Like any financial product, auto equity loans have both advantages and disadvantages. Carefully weigh these before deciding if this type of loan is right for your situation.

Pros:

Lower rates than unsecured alternatives. Because the vehicle serves as collateral, auto equity loans typically carry lower interest rates than credit cards, unsecured personal loans, or payday loans. For borrowers with good credit, rates can be significantly lower.

Quick access to funds. Auto equity loans are usually processed faster than home equity loans or lines of credit. Many lenders can approve and fund an auto equity loan within 1 to 3 business days, making them useful for time-sensitive financial needs.

Fixed payments and terms. Most auto equity loans have fixed interest rates and fixed monthly payments, making budgeting straightforward. You know exactly how much you owe each month and when the loan will be fully repaid.

No restrictions on use. Unlike an auto purchase loan, which must be used to buy a vehicle, auto equity loan funds can be used for any purpose: debt consolidation, home improvements, medical expenses, emergency costs, or anything else.

Cons:

Risk of losing your vehicle. This is the most significant drawback. If you fail to make payments, the lender can repossess your car. Losing your vehicle can have cascading effects on your ability to get to work, fulfill family obligations, and maintain your livelihood.

Ongoing depreciation. Your car continues to lose value while you repay the loan. If the vehicle depreciates faster than you pay down the loan, you could end up owing more than the car is worth, even if you started with positive equity.

Additional debt burden. If you already have an auto loan, adding an auto equity loan means two liens on the same vehicle and two monthly payments related to one asset. This increases your total monthly obligations and financial risk.

Not available for all vehicles. Older cars, vehicles with high mileage, or those with existing title issues may not qualify. Lenders have specific vehicle requirements that can limit your options.

How to Qualify for an Auto Equity Loan

Qualification requirements vary by lender, but most auto equity loan providers evaluate the following criteria:

Sufficient vehicle equity. You must have positive equity in your vehicle. The more equity you have, the more you can potentially borrow. Lenders typically require a minimum equity amount, often $2,000 to $5,000.

Credit score. Most reputable auto equity lenders require a minimum credit score of 600 to 650, though better scores unlock lower rates and higher borrowing limits. Some credit unions offer auto equity products with more flexible credit requirements for their members.

Proof of income. Lenders need to verify that you can afford the monthly payments. You will typically need to provide recent pay stubs, tax returns, or bank statements showing consistent income.

Clean vehicle title. The vehicle title must be in your name and free of any issues such as salvage or flood designations. If you have an existing auto loan, the auto equity lender will work around the first lien, but the vehicle title itself must be clean.

Vehicle condition and age. Lenders prefer newer vehicles in good condition. Most have maximum age and mileage limits, commonly 10 years old and 100,000 to 150,000 miles. The vehicle may need to pass an inspection or appraisal.

To improve your chances of approval and get the best rate, check your credit report for errors before applying, gather all required documentation in advance, and get quotes from at least three lenders. Credit unions often offer the most favorable terms for auto equity loans. If you are considering using the proceeds to pay off higher-rate debt, our auto loan payoff calculator can help you model the savings.

Auto Equity Loan Calculator: How to Use

Our free auto equity loan calculator helps you determine how much equity you have in your vehicle and estimate your potential loan payments. Here is how to use it step by step:

Enter your vehicle's current value. This is the fair market value of your car today. Check Kelley Blue Book, Edmunds, or NADA Guides for an accurate estimate. Be honest about the vehicle's condition, as lenders will verify the value.

Enter your current loan balance. This is the outstanding amount you still owe on any existing auto loan. Find this on your latest loan statement or by contacting your lender.

Enter the loan amount you want to borrow. Based on your equity, enter the amount you would like to borrow. The calculator will show you if this amount is within a reasonable LTV ratio.

Set the interest rate. Enter the rate you have been quoted or an estimate based on your credit profile. Auto equity loan rates typically range from 6% to 18% APR for qualified borrowers.

Choose the loan term. Select your preferred repayment period. Shorter terms have higher monthly payments but lower total interest costs. Longer terms are easier on your monthly budget but cost more over the life of the loan.

The calculator displays your equity position, estimated monthly payment, total interest cost, and a complete amortization schedule. Experiment with different loan amounts and terms to find a combination that fits your budget and financial goals. For strategies on paying off any loan faster with extra payments, visit our loan payoff calculator.