If you’re looking to get out of auto loan debt, you can use a personal loan to pay off your car. (iStock) Many people turn to auto loans when buying a car. More than 85% of new-car purchases and nearly 37% of used-car purchases were financed with a loan in the second quarter of 2020, according to the Experian State of the Automotive Finance Market report. Over time, though, buyers might decide that their auto loan terms aren’t ideal, leaving them to consider ways to pay off their car ahead of schedule. You can take out a personal loan to pay off your car, but it’s not always a good idea. Learn more about the factors to consider before using a personal loan to pay off your vehicle. If you’re looking for a personal loan, Credible lets you compare personal loan rates from multiple lenders in minutes. You can use the funds from a personal loan for nearly any purpose. While you aren’t generally allowed to use a personal loan to fund illegal activities or to do things like gamble, they’re otherwise pretty open-ended consumer products. This means that you can use a personal loan to pay off your car, in most cases. If you’re considering using a personal loan to pay off an auto loan, it’s important to consider all the factors involved. Here are some questions to ask: Using a personal loan to pay off your car has both advantages and disadvantages. If you choose to get a personal loan to pay off a vehicle, take these steps to ensure that your new loan is the most financially sound option for your situation. With Credible, you can compare personal loan rates in one place without affecting your credit score. Now you know that you can use a personal loan to pay off your car … but should you? This is an individual decision, but there are some scenarios when it might make sense to consider paying off an auto loan with a personal loan. If paying off your auto loan with a personal loan would reduce your total interest paid, it might be worth considering. This might mean lowering your loan’s APR, shifting your repayment term, or both. It’s important to calculate not only your monthly interest, but your total interest over the life of the loan and any fees associated with your new loan. That way, you can determine whether your personal loan will actually save you money. Owing more on your car than it’s worth (called negative equity or being "underwater" on the vehicle) is a dangerous situation. If your vehicle were to be stolen or totaled, insurance would only pay up to its market value — if you owe the bank more than that, you’ll be expected to pony up the difference right away. By paying off your auto loan with a personal loan, you protect yourself from any out-of-pocket costs associated with your vehicle’s unexpected replacement. You’ll still owe more than the value of your car, but the loan won’t be called due if the vehicle is stolen or totaled. Most auto loan refinance lenders have maximum loan-to-value (LTV) ratios that they’ll accept. This means that they’ll only refinance your auto loan if you have a certain amount of equity built up in the vehicle. If your LTV is too high, you may not be approved for refinancing. Instead, a personal loan can help you "refinance" into a lower-rate product, but without the LTV requirement. Credible lets you compare personal loan rates from various lenders in minutes. If using a personal loan to pay off your car isn’t the right answer for you, here are a few other ways to pay off your car loan early. Source: Read Full ArticleCan you use a personal loan to pay off your car?
Pros and cons of using a personal loan to pay off your car
Pros of using a personal loan to pay off your car
Cons of using a personal loan to pay off your car
How to get a personal loan to pay off your car
Should you get a personal loan to pay off your car?
You’ll save on interest
You’re underwater on your car loan
You don’t qualify for an auto loan refinance
Other ways to pay off your car loan early
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