Can You Combine a Credit Card Into a Car Loan?

You cannot use an auto loan to pay credit card debt.

You cannot use an auto loan to pay credit card debt.

You've got credit card balances and want to roll them into a car loan to lose the high interest rates. Unfortunately, you can only use auto financing to buy a vehicle. The vehicle acts as the collateral, which the lending institution can take if you default on the loan. Adding hundreds or thousands of dollars in credit card debt to the loan would not benefit the bank. Despite this, you still have a few options that offer lower interest rates and could boost your credit score.

Personal Loan

You can drop the high interest credit card payments with a personal loan or debt consolidation loan. The loan is for a specific dollar amount with a fixed interest rate and paid in equal monthly installments over a series of months, similar to a car loan. You may get a loan interest rate that is lower than your credit card. According Federal Reserve data, the average interest rate for a 24-month personal loan was 10.37 percent in August 2012. Unlike a credit card, once you pay the loan balance, the loan is closed.

Personal Line of Credit

A personal line of credit allows you to use the credit you repay without having to apply for a new loan. These unsecured lines generally range from $5,000 to $100,000 and can be used for any purpose. The bank charges interest on what you use, not the total line amount. For example, if you have a $25,000 line of credit and use $5,000 for home repairs, you pay interest on $5,000.


If you have equity accrued in your home, a home equity line of credit, or HELOC, would give you another lower interest alternative to credit cards. A HELOC has a variable interest rate, which could be problematic if interest rates rise. This line of credit uses your home as collateral, so if you default on what you borrow, you risk foreclosure. Eric Folgate of MoneyCrashers, a personal finance website, warns against maxing out the line of credit. It can have a negative effect on your credit score.


A home equity installment loan is similar to a HELOC in that it uses the equity in your home as collateral. But it's also similar to a personal installment loan. You receive a lump sum and pay off the loan in monthly installments. It appears on your credit report as non-revolving debt.


About the Author

Tracey Lamphere has more than 15 years of experience as a reporter and editor. She has contributed to Sound Publishing newspapers in Washington state. Lamphere also specializes in marketing communications and copywriting. She has a Bachelor of Science in business journalism from the University of North Texas.

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