The financial issue has been and remains one of the defining issues for many of our citizens at all times. At the same time, the restrictions introduced due to the pandemic and war have become an additional factor: people are forced to look for ways and options to receive a certain amount of money in hand in order to get through several months of forced inactivity.
Speaking about options for receiving a loan, it is worth mentioning the possibility for every car owner to pawn a car at a specialized pawnshop. At the same time, the car can either remain in its parking area or garage, or continue to be used by the owner for personal needs.
In the first case, the possible loan amount is naturally higher, but if you need the car for work, it is worth considering the second option as well.
How to Arrange a Car Pledge?
How do you arrange a car as collateral, and what documents are needed for this procedure? If you have ever faced the need to take out a bank loan, you probably remember all those endless queues, dozens of documents, and certificates that must be provided. At the same time, a positive result is not guaranteed if you do not have regular income or your credit history is slightly “stained”.
How do you arrange a car as collateral, and why is it beneficial in your case? Transport, regardless of its type, is valuable property. Like jewelry and expensive digital equipment, you can use a car as collateral at a specialized company – a car pawnshop.
A car pawnshop operates on the principle of any ordinary pawnshop: a specialist appraises the pledged item, after which the borrower receives money. The key difference is that you can arrange a car as collateral and continue using it.
Why is this beneficial and simple for everyone who needs a loan? First of all, the procedure is popular precisely because of its simplicity. You do not need to collect numerous certificates and additional documents, an income certificate is not required, credit history is not important, and there is no need to look for guarantors for the pledge.
All you need is a minimal set of documents:
- car owner’s passport;
- taxpayer identification number;
- vehicle registration certificate.
In addition, permission from your wife or husband is needed if the car was purchased during marriage.
Vehicle Requirements
To pawn a car, you need to provide a liquid vehicle. In other words, there must be an opportunity to quickly sell the car and receive a large amount of money if something goes wrong. Usually, pawnshops set the following requirements for car-secured loans:
- vehicle age – up to 10-25 years depending on the specific make and model;
- technical condition – good, though not necessarily ideal. You can pawn a car if it has minor damage; major breakdowns are not allowed;
- mileage – within normal limits, from 10 to 50 thousand kilometres per year of the car’s age;
- absence of encumbrances – to receive a loan, you need to provide a vehicle that is not pledged, not leased, and not wanted;
- make and model – common. You will not be able to take out a loan against an exotic car, as this will complicate appraisal of the vehicle’s value and its sale.
Car Pawnshop Requirements for Borrowers
If you want to pawn a car at a pawnshop, the terms will be quite simple:
- Ukrainian citizenship for the borrower;
- no overdue loans at the moment;
- availability of a passport, taxpayer identification number, and vehicle registration certificate.
Pawning a car at a car pawnshop is much easier than at a bank: the terms for issuing money are more loyal. You will not have to confirm your credit history, provide income certificates, or collect significant packages of documents.
Procedure
You arrange a meeting with car pawnshop experts and provide the car for inspection. A specialist usually spends no more than an hour inspecting the vehicle, checking both the general technical condition and matching the numbers of the body, engine, units, and mechanisms.
This is necessary to make sure the car is not stolen and has a “clean” history. The maximum loan amount can be received for a car in ideal condition that is 2-3 years old. In this case, the collateral amount may be up to 80-90% of the appraised market value.
At the same time, even if your car is more than 10-15 years old, you can count on fairly decent collateral, which is unlikely to be obtained from an ordinary bank. A car pawnshop must take all risks into account, so the collateral issued to the car owner must be “covered” by a possible later sale of the car.
So, after your car is appraised, a loan agreement is concluded, according to which you have the opportunity to receive cash in any currency. This agreement is signed by a car pawnshop specialist on one side and the car owner on the other.
Additionally, you may pay a small amount for notary services, although serious car pawnshops cover these costs themselves. As a result, just a couple of hours after applying, you receive the desired secured loan at a minimal interest rate. As a rule, you have the right to repay the loan in full after 60 days of using it without any penalties.
Document Preparation
One of the key conditions of pawnshop lending is urgency. The agreement preparation procedure rarely takes more than an hour. Delays are usually related to a high value assigned by the appraiser, because issuing a large amount requires special security procedures.
If you want to know how to arrange a car pledge, you should understand that three documents are issued to you:
- appraised value certificate;
- valuable property pledge agreement;
- loan agreement.
Do not forget to clarify important details: the interest rate, loan term, possibility of early repayment, liability for overdue payment, and others. Usually, they are published on the company’s official website and specified in the standard agreement.
What Are the Pros and Cons of Car Loans at Pawnshops?
There are many more positive aspects:
- fast document processing – if you urgently need money, you will not have to wait long;
- minimum bureaucracy – you can receive a secured loan without income certificates;
- flexible terms – you can leave the car in the parking area to increase the loan amount, or continue using it;
- affordable service prices – fees for appraisal and document signing rarely exceed several thousand hryvnias. Usually, they are included in the loan amount, so they do not need to be paid immediately;
- complete safety – if the car remains in the parking area, company employees are responsible for its storage.
Of course, when you read about how to pawn a car at a pawnshop, you should consider all the pros and cons. There are fewer disadvantages, but they still exist:
- the interest rate for using the money is higher than at a bank, although lower compared with MFIs;
- if you want to receive money amounting to up to 80-90% of the car’s appraised value, you will not be able to use the car – it will be in the parking area.
What Are the Pitfalls of Car Loans and How Can They Be Avoided?
Unfortunately, favorable terms in advertising or on a company’s website do not always mean the same terms in the agreement. Many firms engage in outright falsification or confuse clients with numerous nuances. Therefore, contracts must be read very carefully before you sign.
If you are interested in how to arrange a car pledge and not lose a lot of money, use the services of verified pawnshops. TRUST AUTO Company has been operating in the Ukrainian market for more than 13 years. We offer truly favorable and, very importantly, transparent terms of cooperation.
Frequently Asked Questions
What Is Dangerous About a Loan Secured by a Vehicle Registration Certificate?
By pledging the car, you can use it, but you cannot dispose of the property. The car cannot be sold, re-registered, or deregistered.
Can You Pawn a Car If It Is Registered to Someone Else?
Providing such a service is prohibited by law. You have no right to take the vehicle and pledge it, even if you have a general power of attorney.
Can You Pawn a Car If It Is Financed?
One of the mandatory conditions under which a loan is paid out is the absence of encumbrances. You cannot pledge a car that is financed, leased, or wanted.
Can You Pawn a Car with Foreign Plates?
Theoretically, this is possible if the vehicle is registered to you. But in this case, the transaction becomes more complicated, so its terms need to be clarified individually.
What Happens If You Pledge the Vehicle Registration Certificate and Do Not Pay?
Pawnshops treat their clients quite loyally. If you warn a company representative in advance, you may be offered restructuring, refinancing, or credit holidays. If you do not pay without valid reasons, you will first be charged a penalty according to the agreement. Cars of persistent non-payers may be sold on a consignment lot to compensate for expenses.
What Is Better – Selling the Car or Taking Out a Loan Secured by It?
Every situation has its own rational solution. If you cannot do without the car, it is better to take out a loan and use it. If you want to cut expenses as much as possible, sell it.
