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Can you use a car as collateral for a non-car loan?
I want to buy a boat, but I noticed the interest rates were much higher than car loans. Can I use my car loan as collateral to buy the boat?
Eric Schad · Updated on
Reviewed by Shannon Martin, Licensed Insurance Agent.
If you want to hit the open water in a boat, you can use your car as collateral. However, this all hinges on how much equity you have in your vehicle.
If you own the car outright, the lender can use your car’s
actual cash value
to determine how much they will let you borrow. In addition, your car usually has to be less than 10-years-old and have less than 100,000 miles to be used for collateral.But, if you still owe money on your
car loan
, the situation changes slightly. In this case, you can only use the amount of equity you have in the car. For example, if your original loan balance was $35,000 and you have $12,000 left on your loan, you could potentially use $23,000 to buy the boat. However, the lender will typically use the current value of the vehicle. We’ll say it’s $29,000, so you could borrow $17,000 using your car as collateral.
If you decide to use your car as collateral, remember that you’ll need full coverage car insurance on your vehicle, even if you owned it outright before and just had
liability coverage
.To save the most money, make sure to get the best car insurance rate possible with
Jerry
. The Jerry app lets you compare full coverage insurance rates from 50+ insurance providers. With the extra savings, you should be able to sail the seven seas.View full answer
- Gregory R.
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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.
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