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Can I borrow some funds against my auto loan?
"Is it common practice to borrow money against your car? I want to get money for a purchase and I don't own a home, so I wanted to see if I could borrow cash against my auto loan."
Eric Schad · Updated on
Reviewed by Shannon Martin, Licensed Insurance Agent.
“You can definitely borrow money against your auto loan if you have positive equity in the car loan or if you have great credit.
If you have positive equity in your car, you can do a cash-out refinance. This allows you to refinance the value of your car, even if it results in a larger loan than what you currently have to pay.
For example, your car could be worth $15,000, but you have it paid down to $12,000. You could do a cash-out refinance for the full $15,000, pay off the original loan of $12,000, and put $3,000 in your pocket.
If you have credit, you might also be able to do a higher loan-to-value refinance or auto loan. This is a V.I.P. style treatment for those that have phenomenal
credit
, usually 800 or higher. In this case, you can usually get up to 25% more than the value of your car. For example, your car is worth $20,000, and you owe $13,500 on it.
Some lenders will let you get 125% of the value of the car, so in this case, you could get a loan for $25,000, pay off the original balance, and still have $11,500 to play with.”
View full answer
- Gregory R.
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