The absence of financing for the domestic economy is making the search for the necessary capital to solve any incident or unforeseen event that may arise in various ways. For example: deliver the car in order to get that money, using it as a guarantee for the return of the capital borrowed , by the companies that are responsible for making this type of loan.
Therefore, in loans with the car as collateral with a delinquent customer , the vehicle is the guarantee for the company that the customer will pay the loan amount. Therefore, the primary requirement to apply for a loan of this type is to be the owner of a vehicle , although some companies allow you the possibility of doing so with a motorcycle, even with agricultural machinery.
Essentially, loans with the car as collateral are intended for those individuals who cannot obtain financing through personal loans, because they do not meet the requirements to incur the services offered by conventional banking entities. So they tend to be people who do not have a regular source of income (such as a payroll or pension) and consider that they can make the payment in a certain time .
Companies that grant car loans as collateral operate in a traditional way, even if the client is in default. The client obtains an amount of money and agrees to return it with certain interests, and the car works as a guarantee of payment, in effect, in the due circumstance that the installments are not paid, it could be sold to obtain money with which pay the debt.
It is very normal for companies that offer this service to demand very high interest rates, due to the fact that small amounts are provided for a short period of time. So the calculation of the amount to be paid could be higher.
In many cases the loans with the car as collateral are not really loans but consist of a sale , since during the procedure the client obtains an initial capital to later face some installments, but it is not that he is obtaining a loan, but you are selling your vehicle.
Indeed, the customer sells his car to the company for an agreed capital, around 40% of the real value of the car with a buyback option after the agreed time. Even during the period that the contract lasts, the client can continue driving the vehicle by paying a monthly rental , in the case of HeartLand this is not the case since the purchase of the vehicle is not made , everything works as a normal and current personal credit with the vehicle as collateral for the same loan.
This practice of requesting liquidity for a good or product is something that has been done since ancient times, and on many occasions, saves those who resort to these from financial straits. But the loans usually have conditions that tend to be much more demanding than traditional loans offered by banks. In this case, having the ownership of the car as collateral is enough for the banks or pawnshops to grant the money and receive it back adding some interest.
It must be borne in mind that the practice of guaranteeing with a car is not something accepted by all companies that are dedicated to the pawn or loan business . Many choose different techniques to mislead customers.
There are certain scam companies that, instead of making a loan or pawn, function as car buyers to then offer the seller the possibilities to buy back the car , something that is very different from the pawn and loan. This gives the authority to this company to use the car for convenience, using it as a rental car for the same owner. This practice is a way to deceive clients with supposed loans without a guarantee, an operation that is carried out to guarantee the use of the car by the owner during the payment of the pawn or loan.
Now, guaranteeing a car is a subject with many peculiarities that customers should know, and also take the time to read and understand the conditions that this implies so as not to be deceived . By guaranteeing the car, the company is guaranteed that whoever applies for the loan will pay it even while he continues to use the car. It is an operation destined for those who cannot request personal loans or other traditional banking services due to failure to comply with some requirements, as a source of constant income.