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Can I use my car as collateral for a loan to pay down debt?
I have some high-interest credit card debt I want to pay off. I just paid off my car loan, but the car has a value of about $15,000. Can I use my car as collateral for a new loan?
Eric Schad · Updated on
Reviewed by Shannon Martin, Licensed Insurance Agent.
Paying off high-interest credit cards (as quickly as possible) is always a smart move. And, yes, you can definitely use your car as collateral for a
car loan
. Since you own the car outright, you shouldn’t have any problem using your equity to get a low-interest car loan.
Of course, this loan option does not come without risks. The biggest risk of using your vehicle as collateral is if you default on your loan, your lender or bank will possess it to settle the remainder of your debt.
One thing you should note is that you will have to maintain full coverage car insurance on the loan because the lender will want to protect the asset.
To find the best coverage for the lowest price, download the car insurance comparison shopping and broker app
Jerry
. The Jerry app collects quotes from up to 50 top insurance companies, like Nationwide, Allstate, Safeco, Progressive, and Travelers, in seconds! They even help cancel your old policy once you’ve made your pick.View full answer
- Gregory R.
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