Can a Car Purchased on Installment Be Used for a Loan?
2 Answers
A car purchased through installment payments cannot be used to secure a loan. The specific regulations are as follows: 1. When applying for an auto-secured loan, lending institutions have certain requirements for the car used as collateral. If the car's installment loan has not been fully repaid, it cannot be used to secure another loan. 2. To qualify for an auto-secured loan, the car must be fully paid off. Even if the car was originally purchased through an auto loan, all outstanding payments must be cleared before it can be used as collateral for another loan. 3. A car still under an installment plan is already under mortgage, and a car that is already mortgaged cannot be used to secure another loan.
I bought the car using an installment payment plan and later considered using it as collateral for a loan to fund other things, like renovations. However, when I asked the bank, they said that if the loan isn’t fully paid off, the car’s ownership is still with them, so using it for another loan is basically impossible since the car isn’t technically my property. I’d have to clear the original loan first and fully own the car before I could use it as collateral for a new loan. Otherwise, the only option is an unsecured personal loan, but those come with lower limits and higher interest rates, which I don’t find very cost-effective. In short, the feasibility of using a financed car for another loan depends on ownership status. I recommend carefully reviewing the contract terms when buying a car to avoid headaches later.
