125% Loan

A 125% loan is a type of financing that allows borrowers to borrow more than the value of the collateral they are using to secure the loan. For example, if you want to borrow $20,000 to buy a car but only have a car worth $15,000 to use as collateral, a 125% loan could allow you to borrow the full $20,000. Here's what you need to know about 125% loans.

How 125% Loans Work

A 125% loan is a type of financing that allows borrowers to borrow more than the value of the collateral they are using to secure the loan. For example, if you want to borrow $20,000 to buy a car but only have a car worth $15,000 to use as collateral, a 125% loan could allow you to borrow the full $20,000. Here's how these loans work:

  1. You apply for a 125% loan and provide collateral to secure the loan. The collateral you use will depend on the type of loan you're getting and may include items like a car, boat, or RV.
  2. The lender will evaluate the value of the collateral and determine how much you can borrow. With a 125% loan, you can borrow more than the value of the collateral, up to 125% of the collateral's value.
  3. If your application is approved, you'll receive the loan proceeds and will be responsible for paying back the loan according to the terms of the agreement. This may include monthly payments, as well as interest and fees.

Types of Collateral

125% loans can be secured by a variety of collateral, including cars, boats, and RVs. In some cases, you may be able to use other types of collateral, such as stocks or real estate

, to secure the loan. However, it's important to keep in mind that not all types of collateral will be accepted by all lenders. It's a good idea to speak with a lender and discuss what types of collateral they will accept before applying for a 125% loan.

Pros and Cons of a 125% Loan

One of the pros of a 125% loan is that it can allow you to borrow more money than you would be able to with a traditional loan. This can be helpful if you need to cover additional expenses, such as taxes and fees, or if you have a low credit score and can't qualify for a larger loan. However, one of the cons of a 125% loan is that it may come with a higher interest rate than a traditional loan, which can make it more expensive in the long run. It's important to carefully consider the terms of the loan and the total cost of borrowing before deciding if a 125% loan is right for you.

Alternatives to a 125% Loan

If you're considering a 125% loan, it's important to weigh the pros and cons and consider alternative options. For example, you may be able to borrow from a family member or friend, use a credit card, or get a personal loan to cover the additional expenses. It's a good idea to explore all of your options and choose the financing solution that best fits your needs and budget.

Some more good advice on 125% Loans

A 125% loan can be a useful tool for borrowers who need to borrow more than the value of the collateral they are using to secure the loan. However, it's important to carefully consider the pros and cons and consider alternative options before committing to a 125% loan. By understanding how these loans work and what to expect, you can make informed decisions about your financing options. It's also a good idea to work with a lender you trust and to fully understand the terms of the loan before signing on the dotted line. By taking the time to carefully evaluate your options, you can make the best decision for your financial situation and set yourself up for success.