Who will finance a salvage title car?

It’s almost impossible to finance a salvage title car with an auto loan. Very few lenders offer auto loans for financing salvage title vehicles because your salvage car is already considered a total loss by the insurer, which will make it difficult for the lender to resell if you default. 

Many banks won’t give loans for salvage title cars, either. You’ll usually need to approach smaller lenders or credit unions in your state, and even then, it’s not guaranteed. 

Although a salvage title car may have a lower upfront cost, savings can be offset by hidden expenses like replacement parts, towing, and inspection and rebuilt title fees if you want to make the vehicle roadworthy again. You can learn more about the costs in our guide to buying a salvage title car. 

It’s easier to pay in cash, but if you need to get a loan for a salvage title car, we recommend securing a loan from one of the providers below.

Lightstream, a division of Truist Bank, is an online lender that offers a variety of fixed-rate, unsecured personal loans with loan amounts ranging from $5000-$100,000. This bank only approves good to excellent credit scores.

Interest rates are determined according to the purpose of the loan, the loan amount, and payment method.

Can a personal loan finance a salvage title car? 

You can use a personal loan to finance a salvage title car. If you have a bad credit history, you risk not getting accepted.

Other loans you can use to finance a salvage title car include:

• Title loans: If you have another vehicle, you can borrow against its title and use it as collateral to purchase your project salvage title car. Loan amounts are determined by the value of your car. However interest rates are notoriously expensive on title loans, with some average APR’s hitting up to 300%. If you default, you risk losing your vehicle. 
  
• Home equity loans: If you own your home, these loans allow you to borrow against its equity. Home equity loans are usually used for large expenses and often come at a fixed rate, but they can be stricter than personal loans. If you have little equity, existing debt or a poor credit score, you’re unlikely to be accepted.

If you borrow more than you can afford, you can get yourself in debt, you risk having your assets repossessed. Explore your options and be realistic about your budget before signing a loan agreement.

Auto loan vs. personal loan

Auto loans use the vehicle you’re financing as collateral. If you default, the lender can repossess it. Interest rates are often lower as there’s less risk for the lender, but full coverage insurance is usually required. This is why it’s so difficult to find auto loans for salvage cars. Very few providers are willing to insure them, or coverage is limited. To learn more about insuring a salvage car, visit our blog. 

Personal loans can be used for just about anything, and they’re usually unsecured. As no collateral is required, this means they’re easier to secure. However, there’s more risk for the lender, and you’ll have to pay higher interest rates. You can expect higher barriers to acceptance, including a good to excellent credit score. 

Final thoughts 

It’s better to pay for your salvage title car in cash. Finding car loans on salvage vehicles is almost impossible. This means you’ll have to rely on a personal loan, or an alternative like a title loan or home equity loan. If you use this option, be prepared to pay higher premiums, and ensure you’re fully aware of the limitations of owning a salvage title car before you get locked into loan repayments. 

FAQ’s

Does a salvage title hurt value? 

Yes – salvage title cars are worth 20-40% less than their clean title equivalents. This can limit finance and insurance options, and make them harder to resell – even once it’s been repaired and given a rebuilt title. 

Should I finance a salvage title? 

Financing a salvage title car is not recommended because it can be challenging to secure a loan, they have a lower resell value, they’re hard to insure, and carry risks of hidden damage.