Do I have to use my refinanced car loan check to pay off my old auto loan, or can I use it to pay off my other debts?
I've got some old student loan debt and credit card debt that I'd like to pay off. Can I use the money from my refinanced car loan?
You can probably do both. When you refinance, one of the following scenarios will happen:
- The lenders will provide a lower rate on your existing loan with the same principal. In this case, you’ll simply pay off the old loan balance, but with a lower interest rate, you’ll lower your monthly payments and the interest paid over the life of the loan.
- In other cases, you can ask the lender to lend you the estimated value of the car (typically the amount listed in the Kelley Blue Book or through NADA). If your loan balance is lower than the estimated value, you can often get a loan for the estimated value. Once you pay off the original loan balance, the rest of the cash from the new loan is yours to spend as you see fit.
- Some lenders may also offer you up to 10% more than the estimated value of your vehicle to pay off debt. Again, you’ll pay off the old loan balance and use the rest to pay off other debt. Keep in mind that this is contingent upon your credit, the standing of your bank/credit accounts, and your relationship with the lender.
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