Can I use my car as collateral for a loan?
Dear Driving for Dollars,
I need a loan. Is it possible to get a loan by borrowing against my car to get the money I need?
You are essentially describing the use of your car as collateral for a loan. To use an item you own as collateral, you must have equity in it. If you own your car outright, you could use it as collateral. If you have a car loan, you might have enough equity. You would need to owe less than its value.
To find out, estimate your car’s value at one of the car pricing sites such as Edmunds.com, and compare it to the payoff amount of your car. If you have enough equity, you may be able to use your car as collateral to get the loan you want, though you should check with your lender to make sure the loan terms will allow it.
Keep in mind that if you do use your car to secure a loan, the lender could end up repossessing your car if you default on the payments, which could leave you without transportation.
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