Need fast cash but don’t want to sell your car? In Malaysia, you can use your vehicle as collateral to secure a loan without giving up ownership. Whether you need money for emergencies, business, or debt consolidation, a car collateral loan can be a quick solution.
But how does it work? What are the risks? And where can you get the best deal? Let’s break it down.
What is a Car Collateral Loan?
A car collateral loan (also called a car title loan or logbook loan) allows you to borrow money by using your vehicle as security. Unlike a traditional car loan, you keep driving your car while repaying the lender.
If you fail to repay, the lender can repossess your vehicle to recover their money.
Benefits of Using Your Car as Collateral
✅ Quick Approval & Disbursement
Funds can be released within 24-48 hours.
Minimal paperwork compared to personal loans.
✅ No Need for Good Credit Score
Lenders focus on your car’s value, not your credit history.
Great for those with low CTOS/CCRIS scores.
✅ Keep Driving Your Car
Unlike pawning, you retain possession of your vehicle.
Only the car grant (Geran) is held by the lender.
Eligibility Requirements
🚗 Vehicle Age & Condition
Most lenders accept cars up to 10-15 years old.
The car must be in good working condition.
📄 Ownership & Documentation
You must be the registered owner (no outstanding loans).
Required documents:
Original Geran (Vehicle Grant)
IC & Driver’s License
Road Tax & Insurance
💰 Income & Repayment Ability
Some lenders may ask for proof of income (payslips/bank statements).
Self-employed? Business documents or EPF statements may work.
Where to Get a Car Collateral Loan?
🏦 Banks
Lower interest rates but stricter requirements.
Examples: Maybank, RHB, Public Bank.
📜 Licensed Money Lenders
Faster approval, but higher interest.
Ensure they’re licensed by the Ministry of Housing.
🏪 Pawnshops & Online Lenders
Quick cash, but very high interest (up to 18% p.a.).
Best for small, short-term loans.
Step-by-Step Process to Get Cash Against Your Car
🔹 Step 1: Check Your Car’s Market Value
Use platforms like Carlist.my or Mudah.my to estimate value.
Lenders typically loan 50-70% of the car’s value.
🔹 Step 2: Prepare Required Documents
Geran, IC, Road Tax, Insurance, Income Proof.
🔹 Step 3: Compare Lenders & Loan Terms
Compare interest rates, fees, and repayment terms.
🔹 Step 4: Submit Application & Vehicle Inspection
Lender inspects the car’s condition.
🔹 Step 5: Sign Agreement & Receive Funds
Once approved, sign the contract and get cash in 1-2 days.
How Much Can You Borrow?
📊 Loan-to-Value (LTV) Ratio Explained
Most lenders offer 50-70% of your car’s market value.
Example: If your car is worth RM50,000, you can borrow RM25,000-RM35,000.
⚖️ Factors Affecting Loan Amount
Car age, brand, mileage, and condition.
Your repayment capability.
Risks & Considerations
⚠️ High-Interest Rates
Can range from 8% to 18% per year.
Late payments lead to penalties & higher costs.
⚠️ Risk of Repossession
Defaulting means the lender can take your car.
⚠️ Hidden Fees & Charges
Processing fees, stamp duty, early settlement penalties.
Alternatives to Vehicle Collateral Loans
💳 Personal Loans
Lower interest but requires good credit score.
💳 Credit Cards & Payday Loans
Fast cash but extremely high interest if not repaid quickly.
👨👩👧👦 Borrowing from Family & Friends
Interest-free but can strain relationships.
Tips to Secure the Best Deal
🔎 Negotiate Interest Rates
Better credit = better bargaining power.
📖 Read the Fine Print
Watch out for hidden clauses & fees.
📅 Have a Repayment Plan
Avoid missed payments to prevent repossession.
Conclusion
Using your car as collateral can be a fast way to get cash, but it comes with risks. Always compare lenders, understand the terms, and ensure you can repay to avoid losing your vehicle.
FAQs
1. Can I still drive my car if I use it as collateral?
✅ Yes! You keep the car; only the Geran is held by the lender.
2. What happens if I can’t repay the loan?
❌ The lender can repossess and sell your car to recover the debt.
3. How fast can I get the money?
⏳ As fast as 24 hours with some lenders.
4. Is my car’s age a problem?
🚗 Most lenders accept cars under 10-15 years old.
5. Can I refinance my existing car loan with this?
🔄 Some lenders allow top-up loans if there’s equity in your car.
Need quick cash? A car collateral loan could be the solution—just borrow wisely! 🚗💵
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