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?

"

Answer
“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. “
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Johnny Puckett
Answered on May 25, 2021
Johnny Puckett is a freelance writer and automotive expert. He has contributed content to a number of some of the largest online publications, aftermarket automotive manufacturers’ sites, and automotive informational sites. His experience in the automotive and information fields informs his writing at Jerry. His automotive interests bleed into his free time, where he enjoys modifying his favorite cars and woodworking.
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