Getting financing for a car with a salvage title can seem impossible.
Most traditional lenders view these vehicles as too risky to finance. However, some banks and credit unions may offer salvage title loans if you meet their requirements.
List of Banks That May Offer Financing For Salvage Titles
| Lender | Details |
|---|---|
| Banks | |
| Springleaf Financial | May finance up to 50% of salvage title car’s value |
| Credit Unions | |
| PenFed Credit Union | Offers financing for salvage and rebuilt titles with approved credit |
| Bethpage Federal Credit Union | Considers salvage title financing on a case-by-case basis |
| Truliant Federal Credit Union | North Carolina credit union that finances some salvage titles |
| Affinity Plus Federal Credit Union | Small credit union that may approve salvage title financing |
| Polish American Credit Union | Reportedly finances salvage titles with substantial down payments |
| Specialty Lenders | |
| Westlake Financial | Advertises auto loans specifically for rebuilt title vehicles |
| RoadLoans.com | Online lender focused on high-risk auto loans like salvage titles |
Table of Contents
What Is a Salvage Title and Why Is Financing Difficult?
A salvage title means the car was deemed a total loss by an insurance company after sustaining major damage. This is usually due to a major accident, flood damage, or other event where repairs exceeded the vehicle’s value.
Once the insurer declares it a total loss, the title is branded as “salvage.” This must be disclosed to any future buyers.
Banks avoid financing salvage title cars because:
- They are viewed as high-risk investments due to uncertainty around repairs.
- The car will be difficult to resell if repossessed.
- Many insurers won’t offer full coverage.
- Interest rates must be set higher to offset the risk.
While cheaper to buy, a salvage vehicle costs more to finance over the long term due to higher annual percentage rates.
Lenders That May Finance Salvage Title Vehicles
Very few mainstream banks will finance a salvage title car. However, some options exist among credit unions, online lenders, and specialty financing companies:
Banks
- Springleaf Financial – Personal loan lender that may finance up to 50% of a salvage title car’s value.
Credit Unions
- PenFed Credit Union – Offers auto financing for salvage and rebuilt titles on approved credit.
- Bethpage Federal Credit Union – May finance salvage titles on a case-by-case basis.
- Truliant Federal Credit Union – Credit union based in North Carolina that finances some salvage titles.
- Affinity Plus Federal Credit Union – Small credit union that may approve salvage title financing.
- Polish American Credit Union – Reportedly finances salvage titles with substantial down payments.
Specialty Lenders
- Westlake Financial – Advertises auto loans for rebuilt title vehicles.
- RoadLoans.com – An online lender focused on financing high-risk auto loans.
This list isn’t exhaustive but gives an idea of some potential options. I’d recommend calling lenders directly to ask about current salvage title lending policies.
Tips to Improve Your Chances of Approval
Getting approved for salvage title financing requires going the extra mile compared to a traditional auto loan. Here are some tips:
- Have extensive repair documentation – Showing evidence the car was properly rebuilt will reassure lenders.
- Make a large down payment – A 30-50% down payment can lower a lender’s risk.
- Get quotes from multiple lenders – Compare interest rates and terms to find the best deal. Online lenders may offer more flexibility.
- Improve your credit – A score over 700 will improve your odds of approval substantially.
- Add comprehensive insurance – Full coverage is required by most salvage title lenders. Shop for affordable policies.
- Highlight additional collateral – Real estate or cash reserves could help offset the risk of the car loan.
With preparation and an understanding of lender requirements, it’s possible for your financing application for a salvage title car to get the green light.
Key Risks of Financing Salvage Title Vehicles
While sometimes the only way to afford a car, financing a salvage title vehicle does come with risks to weigh:
- Higher interest rates – Expect to pay 3-10% higher interest compared to a standard auto loan. This extra interest can really add up over the loan term.
- Potential safety issues – Even properly repaired, salvage cars may develop mechanical problems sooner. Always have a mechanic inspect it prior to purchase.
- Loan default risks – If you can’t pay the loan, the lender has little recourse to recover value from a car with a branded title.
- Insurance limitations – Most insurers only offer liability coverage for salvage title cars. Lack of collision or comprehensive coverage removes a safety net if you total the vehicle again.
- Future depreciation – Once branded, the car will never have the value of an identical clean title model. Plan to drive the car long term.
While cheaper upfront, the long-term costs make salvage title vehicles poor investments for most buyers. For younger drivers or those with limited savings like me in high school, paying cash for an older used car with a clean title is generally the smarter financial move if at all possible.
The Process of Buying a Salvage Title Car
If you decide to pursue financing a salvage title vehicle, you’ll need to take additional steps during the buying process:
Inspection and Background Checks Are Critical
- Have a trusted mechanic perform a thorough inspection to identify any issues or signs of shoddy repair work.
- Run a vehicle history report using the VIN and check databases like the National Motor Vehicle Title Information System (NMVTIS) for title brand records.
- Request repair receipts, photos, and details on the damage from the seller.
Shop Multiple Lenders for the Best Loan Terms
- Get pre-qualified with multiple banks, credit unions, and online auto lenders. Compare interest rates and down payment requirements.
- Look for lenders familiar with salvage title lending or subprime auto loans to rebuild credit. Avoid predatory lenders charging exorbitant rates or fees.
- Read all fine print! Salvage title loan agreements often have unique stipulations around insurance, liability for undisclosed defects, etc.
Finalize the Purchase Carefully
- Review title documents to ensure the salvage brand is properly recorded. This is required to be disclosed by law.
- Make sure the lender records their lien on the title during the financing process.
- Comply with your state’s title transfer process and registration requirements for salvage vehicles when buying.
Does Navy Federal Finance Salvage Titles
Navy Federal Credit Union does not appear to offer financing for salvage title vehicles based on their current auto loan policies.
Some key points:
- Navy Federal previously financed salvage titles but stopped in 2022 according to member forum posts.
- Their auto loan instructions warn against purchasing salvage title cars.
- Their FAQ states salvaged cars cannot be financed with a Navy Federal auto loan.
- They are not included on lists of credit unions willing to finance rebuilt titles.
- Personal finance experts advise traditional banks avoid these loans due to the risks.
While they may have offered these loans in the past, Navy Federal seems to no longer finance salvage title cars based on member reports. Those interested will likely need to look into alternative lending sources and options. But check with Navy Federal directly for their latest policy to confirm.
My Closing Thoughts
In summary, getting financing approved for a salvage title car takes effort but can expand options for those in need of an affordable vehicle.
Just be sure to approach the buying process carefully and research lenders thoroughly before committing to minimize headaches down the road.
Sources and Citations
- https://www.evolutionm.net/forums/evo-general/611404-banks-give-loans-salvaged-titles.html
- https://www.navyfederal.org/makingcents/auto/car-title-loans.html
- https://championcashloans.com/get-a-salvage-title-loan/
- https://www.onemainfinancial.com/legal/lending-process
- https://www.cash1loans.com/blog-news/what-happens-to-a-title-loan-if-a-car-is-totaled.aspx
- https://campinghiking.net/loans/rebuilt-title-car-loan/
