Pay Off or Reduce Your Credit Card Debts Through Cash-Out Car Refinancing

Nearly three-quarters of Singaporeans own a credit card. While the majority of Singaporeans are capable of paying off their credit card debts on time, there’s still about 12% of them who are struggling to pay on time and are desperately trying to find ways on how they can pay off or reduce their credit card debts to avoid incurring compounding and/or high credit card interest rates, penalty charges, and bad credit score.

Here are some interesting credit card statistics in Singapore, according to YouGov’s data:

73% of Singaporeans own at least one credit card
56% have more than one credit card
10% own six or more credit cards
7 in 10 Singaporeans use their credit cards once a week
56% of Singaporeans think that credit cards promote excessive spending
88% of Singaporeans are capable of paying off their credit card debts on time

If you are among the 12% who are looking for ways to settle or reduce their credit card debts and happen to own a car, the good news is there’s one smart way to clear your credit card debts: Cash-Out Car Refinancing.

What Is Cash-Out Car Refinancing? How Can It Help Me Settle My Credit Card Debts?

A cash-out refinance of your car loan is one way to convert your car’s equity into cash.

To put it simply, your current car loan will be paid off and you’ll have to replace it with a new car loan, borrowing more than what you currently owe (or based on your car’s market value) and then cash out the difference. You may then use the difference or the extra cash that you’ll get to settle and pay off your credit card debts.

In addition to getting cash to pay off high-interest credit card debts, you may also qualify for a much lower interest rate, reduced monthly repayments, and a loan stretch or extension.

How Much Cash Can I Get From Car Refinancing?

The amount of extra cash that you can borrow depends on factors such as:

Car’s Market Value – as you’re borrowing against your car’s equity, the lender will factor in your car’s market value.
Credit Score/Credit Status – if your credit is not as good, you may have a difficult time getting approved for an amount that’s equivalent to your car’s equity.
Lender’s Terms – some banks or private lenders may set a limit on how much extra cash you can borrow through car refinancing, while others may allow you to borrow up to 90% of the car’s equity.

If the extra cash that you’ll be getting is based on your car’s market value, let’s say $50,000, and your remaining balance from your car loan is $22,000 – you may be able to refinance your car loan for up to $45,000 and take the $23,000 difference in cash. The cash that you will receive will be in a lump sum, hence, this will help you quickly pay off or reduce your credit card debts and even support you on your other needs and expenses.

Is Taking a Personal Loan Better Than Car Refinancing?

It really depends on the borrower’s financial capabilities. The interest rate of a personal loan may vary depending on the type of lender (private money lenders and banks). For banks, the interest rate range for personal loans is 3.4% – 5.43% with a loan tenure range option of 1-5 years. For private money lenders, the interest rest range is 1%-18% with a loan tenure range option of 1-3 years.

As for car refinancing, the interest rate ranges from 1.68%-2.78% with a loan tenure range option of 1-7 years. In addition, you may also be qualified to do a cash-out based on your car’s equity.

What Are the Benefits of Cash-Out Car Refinancing?

Below are the main benefits of Cash-Out Car Refinancing:

ACCESS TO MUCH-NEEDED CASH

If you suddenly need cash for an emergency or perhaps to pay some time-sensitive bills or high-interest debts (most especially credit card debts), cash-out car refinancing can help you get what you need without resorting to other high-interest personal loans.

LOWER INTEREST RATE

If your current interest rate is too high, you might be qualified to get a better interest rate. Depending on how much you’re taking out in cash and your total car loan amount, a lower rate could reduce the overall cost of the car loan.

LOAN TERM EXTENSION

Depending on some eligibility criteria, you can potentially reduce your monthly payment by extending your loan beyond your current repayment term.

Should I Do a Cash-Out Car Refinance To Pay off My Credit Card Debts?

There’s no one-size-fits-all answer to whether a cash-out car refinance is right for someone or not. However, if you urgently need cash to pay off various credit card debts and your car still has a reasonable market value, Cash-Out Car Refinancing can be a good option. You just need to ensure that you are capable of paying the extra cash that you’ve borrowed and fulfill your monthly repayment commitments for your new car loan to avoid incurring penalties and additional debts.

Do I Qualify For a Cash-Out Car Refinance?

When you apply for a cash-out car refinance, the bank or lender will review your existing car loan information, evaluate your car’s condition and market value, and review your credit and financial information and capabilities to determine whether you qualify or not. Should you wish to check your eligibility for car refinancing, please fill out our car refinancing form.

Does Speed Credit Offer Cash-Out Car Refinancing?

Yes, Speed Credit offers and specialises in Cash-Out Car Refinancing. With more than 50 years of combined experience, we have underwritten over $1.2 billion of car loans and have refinanced 3,800+ car loans! To learn more, please visit https://www.speedcredit.com.sg/car-refinancing/ or contact us at (+65) 6444 4400 or (+65) 9851 8281 to speak with one of our car finance experts.