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?

Answer
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.
Eric Schad
Answered on Oct 25, 2021
Eric Schad has been a freelance writer for nearly a decade, as well as an SEO specialist and editor for the past five years. Before getting behind the keyboard, he worked in the finance and music industries (the perfect combo). With a wide array of professional and personal experiences, he’s developed a knack for tone and branding across many different verticals. Away from the computer, Schad is a blues guitar shredder, crazed sports fan, and always down for a spontaneous trip anywhere around the globe.
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