The unfortunate simple answer is no, you cannot use an auto loan to offset your credit card bills. The reason is that no bank or financial institution will grant you a car loan in cashable form.
All auto loans are awarded as transferrable checks, which can quickly be passed on to your preferred car dealer or vehicle vendor. So, there is no such opportunity or grace of being able to use the loan for other reasons. This website shows how to check a car for outstanding finance like Hire Purchase or Personal Contract Purchase.
Most lenders will demand the vehicle identification number (VIN) of the car intended to be purchased during the paperwork and contract agreement of the loan grant. This is done to prevent a case of veering off the original agreement of what you wanted the loan for.
Auto refinance is an escape from an unbearable and inconvenient loan term with your current financier/lender. However, refilling your auto loan may require sacrifices ranging from an over-extended repayment period to an outrageous overall interest in the long run.
Hence, to make life more bearable financially for yourself, especially if you must pay off your debts while servicing an auto loan simultaneously, here is a wiser route to follow:
Apply for a cash-out auto refinance instead.
Confused? Well, this is what it entails: Did you know the equity on your existing auto loan, made possible by your car’s worth, can be cashed out? Of course, it can!!! And here is how: the difference between your car’s worth in cash and the amount you currently owe is cashable. Here’s something you should also know: that difference in value is what is referred to as “equity.”
Automobiles depreciate with use and lose their value as the years run by. Auto loans are, therefore, granted according to a car’s worth based on its current value after proper assessment. A vehicle with a longer useful life would fetch a higher loan package than another with a much shorter useful life.
Still trying to be clearer about the cash-out auto refinance process? I’ll be sure to give you a simple illustration. Assuming you have an outstanding payment of $9,000 (nine thousand dollars), your car is valued at $15,000 (fifteen thousand dollars). The $6,000 (six thousand dollars) difference is then considered your equity.
You can cash out $6,000 to pay off personal expenses, but not all lenders offer this option. If you want to go this route, you’ll need to do some research to find a cash-out service provider who can settle your outstanding bill and give you the remaining balance. It’s worth noting that your current lender likely won’t offer this service or recommend it to you.The cash-out auto refinance method is also an auto loan refinance process just that the former helps you obtain cash at hand for miscellaneous expenses during your loan repayment period as explained above. There are additional channels that you could leverage which are cheaper means than refinancing your car. Let’s discuss the feasible processes:
Passive or Full-time Hustling
There are many auto rental or car hire businesses you could engage in with your car to fetch you passive income in addition to your major paycheck. Depending on your free time outside official duties, you can do this part-time/passively or full-time if you do not have a 9 to 5 job schedule. For those who find themselves struggling with financial commitments due to their investments in such ventures, seeking help from a debt relief service might be necessary. In this context, solutions such as Americor’s debt relief in Kentucky can provide tailored strategies to manage and reduce your financial obligations, enabling you to continue pursuing opportunities in the auto rental industry.
Modify your Loan Terms with the Lender
To make repayment more convenient for yourself, contact your financier for reconsideration regarding the unbeneficial terms backing the contract. They may sound indifferent initially but if you hit the right buttons and happen to get lucky by reaching the appropriate official in charge, you will be considered. That would save them from going through endless protocols of trying to repossess your car if you default in payment.
Credit Card Borrowing Advantage
Although some credit cards are issued with zero percent interest charged for the first year of use, it is best to check with your vendor before you begin borrowing on your credit card. That is because several others charge users as much as 20% on their cards, so it is best first to be aware.
Meager monthly payments on your CC are also not a great recipe for borrowing. That could worsen your credit score and mess up your finances quickly rather than solve your credit card debt problems. So, check all these underlying issues first before diving head into borrowing on your credit card. It’s important to understand the average credit card debt by age to gauge financial health and plan debt management strategies effectively.
Exchange or Out-right Sale of your Car
You may decide to trade your car for a cheaper one or be bold to sell it off completely to increase your gain. Exchanging for a less-expensive vehicle should come with extra cash or a lower repayment balance as the case may be. It could also complete your repayment if you get a very good sale deal.
Other Less Demanding Loans
Home equity and personal loans are two of the other less demanding loans you can select from. Remember that buildings are valued more than automobiles because of their tendency to appreciate with time contrary to the depreciable value of vehicles over time. Therefore, you stand a better chance of obtaining higher equity on your house than you do on your car. Personal loans require no collateral so you may also want to give them a try.
Bottom Line
When considering applying for an auto equity loan, also known as cash-out auto refinance, it’s important to explore credit unions, as they often offer lower interest rates compared to traditional banking institutions. Auto equity loans streamline the process of accessing quick cash, so it’s beneficial to take this into account when deciding whether to pursue an auto refinance. If you don’t meet the requirements for an equity loan, there are several alternative options to consider, five of which have been detailed above. Feel free to choose the option that best suits your qualifications, preferences, and convenience, as these factors are crucial in making your decision.
