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Can I get a car loan and use the money to pay off my credit cards?
"I need some cash to pay off my credit card debt, so I applied for a personal loan at my bank. They offered me a loan with a 12% interest rate, but their car loans have a 3% interest rate.
Can I just apply for a car loan and use the cash to pay off my credit cards?
"
Johnny Puckett · Updated on
Reviewed by Shannon Martin, Licensed Insurance Agent.
“The bank is not going to give you cash if you get approved for an auto loan. Instead, they are going to write a check to the person or dealer selling the car. This means that you can’t use a car loan to pay off credit card debt.
On the topic of
interest rates
, lenders determine the rate on a loan based on the amount of risk involved. It’s not just a number that they pull out of a hat. The reason why a car loan has a lower interest rate is because it is less risky. The loan is secured by the car, meaning that if you don’t pay, the lender can take your car and sell it to someone who will.
A personal loan, on the other hand, is unsecured. This means if you decide not to pay, the lender would have no recourse.
“
View full answer
- Gregory R.
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