It is possible to use money released by a remortgage to settle hire purchase or personal contract purchase (PCP) car finance. Doing so clears the finance agreement, but it changes what the debt is secured against: car finance is secured on the vehicle, while a remortgage secures the balance on your home instead. That trade-off is worth thinking through before you commit.
This page looks specifically at car finance as a debt to consolidate. For the general risks and mechanics of debt consolidation remortgages, see our debt consolidation remortgage page. If your car finance already has missed payments recorded, see missed car finance payments and a remortgage for how that is treated on your file.
On this page
This page covers
- Reason for remortgaging
- Consolidating debtsSecuring debts on your home carries extra risk and needs careful thought.
In short
- Settling car finance early needs a settlement figure from the finance company, not the balance shown on a statement.
- Once cleared this way, the debt is secured on your home instead of the vehicle.
- Voluntary termination is a separate option if you can no longer afford the payments and want to hand the car back.
- A longer mortgage term can mean paying more overall for the car than the original agreement would have cost.
Your home may be repossessed if you do not keep up repayments on your mortgage. Think carefully before securing other debts against your home. Borrowing over a longer term can mean paying back more in total.
How does settling car finance through a remortgage work?
You ask your finance company for a settlement figure, which is usually different from simply multiplying the remaining monthly payments, since some agreements reduce the interest charged when you settle early. Once you have that figure, the amount can be included in the extra borrowing raised through the remortgage, and paid to the finance company to clear the agreement.
Car finance is a regular commitment lenders look at when assessing what you can afford, alongside your credit history. Clearing it removes that monthly payment from your outgoings, but it is replaced by a larger mortgage payment instead.
What changes once the car finance is on your mortgage?
Hire purchase and PCP agreements are secured against the vehicle, so if payments are missed for long enough, the finance company can repossess the car, separate from anything happening to your home. Once the debt is settled through a remortgage, that specific risk to the car goes away, but the same amount is now secured against your home instead.
| Point to compare | Keep the car finance | Settle it with a remortgage |
|---|---|---|
| What is secured | The vehicle | Your home |
| Typical term remaining | Usually 1 to 4 years | Often spread over the rest of the mortgage term |
| Monthly payment | Fixed for the agreement | Usually lower, spread over more years |
| Total cost | Fixed by the original agreement | Can be higher overall if spread over a long mortgage term |
A general comparison, not advice or a quote. Your own figures and terms will differ.
Our debt consolidation remortgage page sets out a similar worked example showing how a longer term can raise the total cost, even when the monthly payment falls.
Is voluntary termination a better option?
Voluntary termination lets you hand the car back once you have paid at least half the total amount payable under a hire purchase or PCP agreement, ending it without needing a settlement figure or extra borrowing. It can suit someone who can no longer afford the car and does not need to keep it, but you lose the vehicle, and there can be costs if it is in poor condition or has done high mileage.
Settling through a remortgage keeps the car and clears the finance, but secures the cost against your home instead. Which makes more sense depends on whether you need to keep the car, how much equity you have and whether the remortgage is affordable in the first place.
Once car finance is settled through a remortgage, missing mortgage payments afterwards could put your home at risk, not just the car. Think about whether that trade-off is worth it before you commit.
What are the alternatives?
- Keeping the car finance as it is, if the payments are manageable and the term is not too long.
- Voluntary termination, if you no longer need the car and have paid at least half the total amount payable.
- Talking to the finance company, which may offer a payment holiday or revised terms if you are struggling.
- A second charge mortgage, which leaves your existing mortgage deal untouched but still secures the debt on your home.
Free, impartial advice on comparing these is available from MoneyHelper, StepChange and National Debtline.
What may shape settling car finance through a remortgage
| Factor | Why it matters |
|---|---|
| Settlement figure | The exact amount owed to end the agreement early, obtained from the finance company. |
| Time left on the agreement | A shorter remaining term may mean less is gained by settling early. |
| Whether you need to keep the car | This affects whether voluntary termination is a realistic alternative. |
| Term of the new mortgage borrowing | A longer term lowers the monthly cost but can raise the total paid for the car. |
| Loan to value after the extra borrowing | Raising money for car finance increases your LTV, which can affect your options with adverse credit. |
| Other debts being consolidated | Combining car finance with other debts increases the total amount you need to borrow. |
| Income and affordability | The larger mortgage payment has to fit comfortably within your budget. |
These are general points, not lender rules. Each lender sets and changes its own criteria.
Information an adviser may ask for
You don’t need all of this to make an enquiry. It helps to know where to find it, because an adviser is likely to ask about most of it.
- A settlement figure for the car finance agreement, obtained from the finance company
- The agreement type (hire purchase or PCP) and how long is left on it
- Any other debts you want to consolidate at the same time
- Your credit reports from Experian, Equifax and TransUnion
- Your mortgage balance, deal end date and any early repayment charges
- Proof of income and a realistic monthly budget
Frequently asked questions
Can I settle car finance through a remortgage if I have bad credit?
It can be possible, but as with any debt consolidation, lenders will look at your wider credit history alongside the amount you want to borrow. See debt consolidation remortgages with bad credit for how adverse credit generally changes things.
Do I still need a settlement figure if I am consolidating through a remortgage?
Yes. The settlement figure is what the finance company will accept to end the agreement early, and it is usually different from simply adding up the remaining payments, since some agreements reduce the interest owed when settled early.
Is it cheaper to settle car finance with a remortgage than to keep paying it?
The monthly cost is often lower, but the total may not be, because mortgage interest can run for many more years than the original car finance agreement. Compare the total cost, not just the monthly figure, before deciding.
What if I already missed payments on the car finance before settling it?
Settling the agreement clears the outstanding balance, but it does not remove the record of any missed payments already made. Our page on missed car finance payments explains how these show on your credit file.