How Can I Get a Car Loan Without Paying Comprehensive Insurance?
With a traditional auto loan, you will be required to maintain collision and comprehensive insurance on the financed vehicle for the life of the loan. There are ways, however, to obtain a loan to buy a car without carrying these types of insurance.
Other People Are Reading
Things You'll Need
- Description of the vehicle you want to buy
- Copy of your credit report
- List of your current assets and debts
Instructions
-
Seek alternative financing
-
1
Examine the collateral that is available to you. When you obtain a car loan you are simply asking a bank for money and collateralizing that loan with a vehicle. If you don't pay the loan, they take your car. Nearly every bank that issues car loans will require that you maintain comprehensive and collision insurance and list them on the policy as a loss payee. If you don't want to do this, you will need to obtain a loan using some other type of collateral. Make a list of everything that you own that has value. This could be your home, other vehicles, a life insurance policy, annuities or any financial asset.
-
2
Check the equity you have in the items above. You may own an expensive home but you must have equity in it (it must be worth more than you owe on it) if you want to use it as collateral. If you have life insurance, contact your agent or company to see if the policy has cash value that you can withdraw or take a loan against. If you own a valuable collection, land or other significant asset you may be able to find a lender that will accept these items as collateral.
-
-
3
Seek alternative financing. Once you have identified assets you can use for collateral, contact banks and other lending institutions to see if you are able to obtain a loan. The most common method used is a home equity line of credit. If you tap the equity in your home you can use the funds for any purpose and will not have to show proof of insurance on your vehicle. A life insurance loan will work the same way.
-
1
Tips & Warnings
Review your credit report carefully. The better your credit is, the more financing options will be available to you. You can obtain a free copy of your credit report from each of the three main credit bureaus by visiting annualcreditreport.com.
If you have good credit you may be able to finance a car purchase with a credit card. This is done by depositing a credit card cash advance check into your checking account and then writing a certified check to the dealer from that account. This will eliminate any requirement for you to carry comprehensive and collision insurance and the debt will be unsecured, meaning there will be no collateral. But beware, as you may be exposed to interest rates as high as 20 to 28 percent, while car loan interest rates generally range from 0 to 10 percent.
Remember that comprehensive and collision insurance pays to repair or replace your vehicle if it is damaged or stolen. Regardless of the financing method you use, there will be some type of collateral required. If you obtain money to buy a car using one of the methods above and your car is then damaged, you will have to continue to pay the loan. If you do not, you may lose whatever collateral you provided. Think very carefully before you decide to finance a car without insuring it.
References
Resources
- Photo Credit luxury car - model toy car image by alma_sacra from Fotolia.com
