Can Credit Card Companies Take Someone’s Car for Debt?

If you fall behind on paying credit card debt, can companies actually take your car for debt? Can they take your furniture or your home or the clothes you bought with that credit card?

Surprisingly, many people think that the answer is yes. This leads to even more stress for a naive consumer who doesn’t understand the different between secured debt and unsecured debt.

Do you buy a car with a credit card? Of course not. When you purchase a vehicle, you apply for a car loan. This is a loan good only for the purchase of that car and the car is pledged as collateral for the loan.

An automobile loan is known as “secured” debt. The amount you owe is leveraged against the value of the item you purchased. If you buy a car worth $15,000 you cannot obtain a $20,000 loan for that automobile as the loan is based on the value of the collateral.

You’ve seen this with home sales as well. The mortgage obtained when you buy a new home is money loaned specifically for that particular property and the home is collateral that guarantees loan repayment.


If you don’t make your mortgage payments you will face foreclosure and lose the home. The lender then sells your home in order to recoup the mortgage amount he lends to you.

If you fail to pay your monthly car note, you may find a tow truck in your drive when the lender repossesses your vehicle. The lender takes back the car and sells it to pay off the loan you agreed to but didn’t pay as promised.

Two Qualifiers

When you apply for a loan for the purchase of furniture, a car or a home, the lender looks at two qualifiers in approving that loan amount.

1. The lender considers your creditworthiness by pulling a credit report.

2. The lender examines the property (appraisal) to see if the home or car you are buying is worth what you are paying for it.

Both of the qualifiers must be met in order to obtain a secured loan. The loan is not a revolving account. The payments are set to meet a specific pay off date and you can’t add to the amount of the loan with further purchases.

Credit cards are unsecured debt. If you don’t pay your monthly statements, can a credit lender take your car for debt? No, they can’t.

Your Credit Rating

When you applied for a credit card account, the lender had only one criterion to meet in order to approve the application. That criterion is your personal credit rating. If you have a credit rating that is good enough for the credit card you are applying for, you will be approved.

Of course there are other considerations credit card lenders take into account. Even though you have a great credit rating, you may be declined for a new credit card if the lender feels you have open credit lines that are excessive for your income.

You may use your new credit card to buy tools, automotive accessories, clothing, or gifts. You may charge airline tickets or restaurant meals to your credit card.

Spending Limit

Once you have an open spending limit on a new credit card, you can make purchases at any store that accepts that credit card as payment. If the card has a Visa or MasterCard logo that means you can use it for charges throughout the world.

The unsecured nature of credit cards is the reason credit card interest rates are higher than interest charged on secured loans such as car loans.

If you fail to pay your credit card debt, the lender can hound you with phone calls demanding payment, can negotiate a lower payment if they are inclined to do so and can sue you in court for payment of your debt.


Now, when you know that your credit lender can’t take your car for debt you may wonder whether they can take your home or your furinture?

No, they can’t! In fact, the credit lender cannot take the things you purchased using that card as those purchases were not used to secure the debt.

I recommend you to check out our guide on debt elimination and see if you can apply any of the strategies outlined.