How To Get A Second Lien Car Title Loan
When you get a title loan, your vehicle is the collateral. You use the vehicle's title to secure your loan. In doing so, the lender places a lien on the title. The lien indicates the lender has a legal claim to your vehicle until you repay your loan in full. You make regular payments on your title loan, including the principal and interest. Once you make the final payment on the loan, you request a release of the lien on your vehicle’s title.
After your lien is released and you update your title, you regain full vehicle ownership. You can sell it or transfer ownership without worrying about any lender restrictions.
A common question, however, is, can I get a second-lien title loan or registration loan, or can you have more than one title loan at the same time? Second-lien title loans are possible but depend on your state and the lender’s guidelines.
What Is a Second Lien Title Loan?
A second lien title loan is also called a second position title loan. If you’re the borrower, you have an existing lien on your vehicle’s title. For example, you might still owe money on the auto loan you used to purchase the vehicle. If you seek another loan on that title, it will create a second lien on the same car. As part of the process, you apply for 2nd lien title loans with a different lender to get additional funding. The second lender might then assess your vehicle's value and financial situation. If approved, the lender puts a second lien on the title. Different lenders will have varying policies regarding second-lien title loans. Some offer a second lien if you have enough equity to secure the additional loan. Other lenders may not be willing to provide a loan if there’s a lien on your title or if you're applying for a title loan with expired registration. State regulations and laws can also play a significant role—some states prohibit multiple liens on the same vehicle. If your title already has a primary lienholder, the second lender may coordinate with the first to ensure both parties agree. However, the first lienholder doesn’t have to agree to let a second lien be placed on the title.
How Can I Get a 2nd Lien Title Loan?
If you’re applying for 2nd lien title loans, your car's equity can be the biggest consideration. It determines how much you would be eligible to receive as a loan. Lenders are more likely to consider 2nd lien title loans if you have sufficient equity in your vehicle. Your equity is a calculation where the lender will subtract whatever balance you owe on current loans that your vehicle is used as collateral for by the market value. That market value is current—not what you bought the car for. If you did the calculations and had a total vehicle equity of $10,000, that would be the collateral value on which your loan would be based. Once you subtract existing liens, the higher the remaining equity, the more likely you are to get a second loan on top of the existing one.How Do You Apply for a 2nd Lien Title Loan?
If you’re thinking about applying for a second lien title loan, there are a couple of things you can do to prepare for what's required with the application process, including:- Figure out the current market value of your car. You can do some research online to figure this out or get a professional appraisal.
- Make sure you’re aware of the remaining balances on any loans currently secured by your vehicle.
- Know lenders can have different equity requirements from one another.
- Assess your financial situation and ensure that taking on a second loan is manageable.
- Whoever the first lienholder is on your vehicle keeps the primary claim. If you were to default on your loan and it was repossessed and sold, then the first lienholder would get their proceeds first. Anything left would go toward the second lien.
- Second-lien titles are riskier for the borrower and the lender, so they’re tougher to get than the first.
- The second lien title loan might have a higher interest rate than the original because the lender faces more risk in this scenario.