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 · Answered on Oct 25, 2021
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
WHY YOU CAN TRUST JERRY
Jerry partners with more than 50 insurance companies, but our content is independently researched, written, and fact-checked by our team of editors and agents. We aren’t paid for reviews or other content.
Browse More Content
Insurance in Your State
What Others Are Asking
What APR should I shoot for on a 60-month car loan?
I want to get a 60-month car loan, but this is my first time getting one. I also want to get the best interest rate. What APR should I try to get?
Oct 25, 2021
What is the highest APR a car loan can have?
I was shopping around for a car loan and I don't have great credit. A lender offered me a loan at 15.9%, but that seems high. What's the highest an APR can go?
Oct 25, 2021
Can I take out a loan for a car with over 100,000 miles?
My dad meticulously took care of his car, but he's going to buy a new one. I want to buy his, but I need a loan. Can I get a loan for a car with over 100,000 miles?
Oct 25, 2021
Read Advice From Car Experts At Jerry
Pontiac Torrent V6
The Pontiac Torrent V6 gets up to 264 horsepower and 19 mpg, offering enough power to make this short-lived model worth consideration in the used market.
How to Get an Alaska Learner’s Permit
Young drivers in Alaska are eligible for an instruction permit upon turning 14—but the rules for applying may depend on where you live.
Browse By Topics
Easiest way to compare and buy car insurance
Find insurance savings — it's 100% free
No long forms
No spam or unwanted phone calls
Quotes from top insurance companies