Can a car that is not your own be used as collateral?
2 Answers
Yes, as long as the vehicle owner agrees, this type of loan is called an auto title loan. Here are the relevant details: Auto Title Loan: An auto title loan is a loan obtained from financial institutions or auto consumer loan companies using the borrower's or a third party's car or purchased vehicle as collateral. Used Car Loan: Used cars can be used as collateral for loans, but the conditions are very strict. Although many banks do not refuse used car title loans, there are numerous requirements. You must provide proof of intent to sell the vehicle, a vehicle appraisal report, the seller's vehicle ownership certificate, the vehicle's annual inspection certificate, and the loan amount must not exceed 50% of the vehicle's total value. Some banks even require that the application for a used car title loan must be secured with real estate; otherwise, even if all five conditions are met, the loan will not be approved.
My friend once asked the same question, thinking that having the car in hand was enough to operate. But when he actually went to mortgage it, he was dumbfounded: the bank required the car ownership certificate name, ID card, and signature to all be his own, not even a power of attorney notarization would work. Last time he took his dad's car to a pawn shop, they did accept it, but when he couldn't repay the loan, he was almost sued for fraud, and in the end, the car was taken away and he had to pay a penalty. Unless the car owner personally handles the procedures, those relatives or friends who verbally agree to lend you the car will most likely back out when it comes to signing. It's recommended to have the car owner handle the mortgage themselves, and you act as a guarantor for more security.
