Can I use my car as collateral for a non-car loan?

I want to get a loan for an ATV. I own a car outright. Can I use my car as collateral for the loan?

Answer
Yes, you can use your car as collateral for another loan. However, there are a few caveats:
  • You must have positive equity in your car
  • You can’t borrow more money than you have positive equity
The best-case scenario is if you own the car outright—which it sounds like you do! That way, you won’t have to worry about car liens or overextending your finances.
If you have negative equity on your car loan, then you likely can’t use it as collateral because you owe more than the car is worth. In this case, consider paying down your car loan or asking your lender if you qualify for an ATV loan.
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Eric Schad
Answered on Dec 06, 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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