Yes, you can remortgage to pay off car finance, whether it is PCP, hire purchase or a personal loan, and lenders treat it as ordinary debt consolidation. You ask the finance company for a settlement figure, add it to the new mortgage, and the solicitor usually pays it on completion. The catch is the term: a £14,000 settlement spread over 20 years costs more in interest than finishing the agreement, on a car that will be worth little long before the debt is gone. The alternative that leaves your mortgage untouched is a secured loan, also called a homeowner loan or second charge mortgage.
Lenders will let you do it, but a car loses value fast and a mortgage runs for decades. It makes sense when you are remortgaging anyway, the finance rate is high, and you will overpay. It rarely makes sense for a car you plan to change soon or finance that is nearly paid off.
- PCP, hire purchase and car loans can all be repaid from a remortgage using a settlement figure from the finance company.
- Under the Consumer Credit Act you have the right to settle early, and the finance company must rebate part of the interest.
- A PCP settlement figure includes the optional final balloon payment, so it is often much larger than people expect.
- If the car is worth less than the settlement figure, that negative equity is added to your mortgage and repaid over the full term.
- Most lenders cap remortgages that repay debt at 80% or 85% loan to value.
- Checking your options will not affect your credit score.
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How lenders typically treat it
| What lenders look at | Typical position |
|---|---|
| Type of agreement | HP, PCP and unsecured car loans are all commonly consolidated. A lease or contract hire cannot be settled in the same way; early termination usually means paying most of the remaining rentals. |
| Settlement figure | Lenders want a written settlement statement from the finance company, normally valid for 28 days, and will often pay it directly on completion. |
| Maximum loan to value | Commonly 80% to 85% where the remortgage repays any debt, and lower for adverse credit. |
| Affordability | The car finance payment is usually removed from your outgoings because it will be cleared; some lenders keep a notional car running cost in the assessment. |
| Negative equity on the car | Not a barrier for the mortgage lender, since the security is your home, but it means borrowing more than the car is worth over a long term. |
| Ownership after settlement | Settling HP or PCP transfers ownership to you. Some lenders ask for confirmation that the finance has been cleared and the car is unencumbered. |
| Recent finance | A car bought on finance in the last few months can raise questions about affordability; lenders may ask why it is being consolidated so soon. |
| Credit conduct | Missed car finance payments in the last 12 months narrow your lender choice, as with any consolidation remortgage. |
A general guide to how the market behaves, not a promise about any lender. Criteria change and every case is assessed individually. See the lender criteria database for named lenders.
Can you remortgage to pay off car finance?
Yes. Car finance is one of the most common debts included in a consolidation remortgage, alongside credit cards and personal loans. You ask the finance company for a settlement figure, the mortgage lender includes that amount in the new loan, and on completion the solicitor either pays the finance company directly or releases the money to you with a condition that the agreement is settled.
The three agreements you are most likely to hold work slightly differently. With hire purchase (HP) you are paying the full price of the car in instalments and own it after the last payment, so settling early simply brings that ownership forward. With personal contract purchase (PCP) your monthly payments cover only part of the price, and a large optional final payment (the balloon, sometimes shown as the GMFV) sits at the end. Settling a PCP early means clearing the balloon as well, which is why a PCP settlement figure can be much larger than people expect. A personal loan used to buy a car is unsecured, so the car was never security and the settlement is just the loan balance.
Lenders see car finance as ordinary consumer debt. The limits that apply are the usual ones for any consolidation: a lower maximum loan to value, commonly 80% to 85%, and a full affordability check on the larger mortgage. Our guide on whether you can remortgage to pay off debt covers those rules in full.
The real question is not whether you can, but whether you should. Because the new borrowing is secured on your home, your home may be repossessed if you do not keep up repayments on the mortgage.
How do you get a settlement figure for PCP or HP?
Phone or message the finance company and ask for an early settlement figure. Under the Consumer Credit Act 1974 you have a legal right to settle a regulated agreement early, and the lender must give you the figure in writing. It is normally valid for 28 days, after which you request a new one.
The figure will be less than the sum of the remaining payments because the company has to rebate part of the future interest, using a statutory formula. It will not be as low as the capital outstanding, because the regulations allow the company to keep a small amount of interest to cover the settlement. On a PCP the figure includes the balloon payment in full, since that is capital you have not yet paid.
Two practical points. First, if you are part way through a month, the settlement figure assumes your next direct debit is not collected, so check whether a payment will still go out and whether it will be refunded. Second, once the finance is settled, HP and PCP agreements transfer the vehicle to you and the finance company's interest is removed from the registration; keep the confirmation letter, as some mortgage lenders ask for it.
A qualified adviser will tell you which lenders insist on paying the finance company directly and which release the funds to you.
What if the car is worth less than the finance?
This is negative equity on the car, and it is common on PCP because the car depreciates faster than the balance falls. If your settlement figure is £14,000 and a dealer would give you £11,000 for the car, you are £3,000 underwater. Paying off the finance from a remortgage does not make that gap disappear; it moves it onto your mortgage, where it is repaid over 20 years or more with interest.
That matters because of what you get for the money. Consolidating credit cards buys you an end to a high-rate debt. Consolidating negative equity on a car buys you nothing tangible: you are borrowing against your home to cover the difference between what a car cost and what it is now worth. It may still be right if it ends an expensive agreement on a car you need, but it deserves a moment's honesty.
There are alternatives to consider before you decide. On HP and PCP, once you have paid half of the total amount payable under the agreement, you have a legal right to voluntary termination: you hand the car back, owe nothing further beyond any excess mileage or damage charges, and walk away from the negative equity. It costs you the car, but it does not cost you your home. Free advice from MoneyHelper, StepChange or Citizens Advice can help you weigh voluntary termination against consolidation if the numbers are tight.
If the car is worth more than the settlement figure, the sum is more comfortable: you end up owning an asset outright that could later be sold to overpay the mortgage.
Does it make sense to put car finance on a 20-year mortgage?
Sometimes. The monthly saving is real, because car finance often carries a high rate and a short remaining term. The cost is that a debt which would have ended in a few years now runs for the life of the mortgage, on an asset sold or scrapped long before then.
Illustrative rates: The rates in this example are fictional and used only to show how the numbers work. They are not an offer. Your actual rate may be lower or higher and will depend on your circumstances, your property and the lender. Consolidating debt over a longer term can mean you pay more interest overall, even if your monthly payment falls.
| Position | Amount |
|---|---|
| Current monthly payments (car finance £14,000 at 12.9% with three years left, plus credit cards £6,000 at 24.9%) | £646/month |
| New monthly payment on the £20,000 added to a remortgage (5.4% over 20 years) | £136/month |
| Total repayable on the £20,000 over the 20-year term | £32,748 |
Look at the car element on its own. Left to run, the £14,000 of finance would cost about £16,957 over three years. Moved onto the mortgage at 5.4% over 20 years, the same £14,000 costs £96 a month and about £22,924 in total, roughly £6,000 more, for a car that will be worth very little by year 20. The £3,000 of negative equity from the previous section would cost about £4,912 to repay over 20 years.
The way to have the low monthly payment without the high total cost is to overpay. If you kept paying even £200 of the £510 monthly saving as a mortgage overpayment, the car element would clear in a few years rather than 20 and the extra interest would shrink to a fraction. Our debt consolidation calculator lets you test overpayment levels with your own figures.
When is remortgaging to clear car finance worth it?
It is most likely to be worth it when several things line up. You are remortgaging anyway, because your fixed rate is ending and there is no early repayment charge to pay. The finance rate is high. You intend to keep the car for years, so you are not paying for something you will hand back. And you are prepared to overpay, so the long term is a safety net rather than the plan.
It is least likely to be worth it in the opposite cases. If the finance has less than a year to run, the saving is small and the mortgage term is long. If the agreement is at 0% or a low promotional rate from a manufacturer, moving it to a mortgage at any rate costs more. If you plan to change the car within a year or two, clearing the finance now and then trading the car in may leave you paying a mortgage for a vehicle you no longer own. And if the negative equity is large, voluntary termination may be the better exit.
There is also a middle route. If you are inside a fixed rate with an early repayment charge, a secured loan can clear the car finance while your mortgage stays as it is, and is usually available over a shorter term than a remortgage, which limits the total interest. Our secured loan versus remortgage comparison sets the two side by side, and the £20,000 secured loan page shows what that looks like in numbers.
Whichever route you take, an FCA authorised broker should show you the total cost over the term, not just the monthly figure.
What improves your chances
- Get a written settlement figure from the finance company before you apply, and refresh it if it expires before completion.
- Check the car's current value against the settlement figure so you know whether you are consolidating negative equity.
- Keep every car finance payment on time in the months before applying; a recent missed payment narrows the lender pool.
- Confirm the new mortgage stays within 80% to 85% loan to value once the settlement figure and any other debts are added.
- Have your V5C and the finance agreement to hand; some lenders ask for both to confirm the vehicle and the amount.
- Decide in advance how much of the monthly saving you will overpay, and tell the adviser so the term and product suit that plan.
Alternatives worth considering
A secured loan can clear the car finance without disturbing your current mortgage, often over a shorter term of five to ten years that fits the life of the car better; our secured loan versus personal loan comparison also covers the unsecured option for smaller settlements. If the finance is nearly paid off, simply finishing it is usually cheaper than any consolidation. On HP or PCP with negative equity, voluntary termination once half the total amount payable has been paid ends the agreement without borrowing against your home. And if the car finance is one debt among many that you cannot manage, free advice from a debt charity should come before any of these.
Worried about debt? Get free advice first
If you're struggling, it's worth speaking to a free, impartial debt advice service before you borrow more. They don't sell anything and won't judge your situation.
- MoneyHelper: Free, impartial debt advice backed by government
- StepChange: The UK's largest free debt charity
- Citizens Advice: Free, confidential advice on debt and money
Checking your options with Equiclear will not affect your credit score.
Frequently asked questions
Can I remortgage to pay off PCP?
Yes. Ask the finance company for a settlement figure, which will include the optional final balloon payment, and add it to the remortgage. Once settled the car is yours outright. Check the car's value first, since early in a PCP it is often worth less than the settlement figure.
Can I remortgage to pay off hire purchase?
Yes. HP is straightforward to settle early under the Consumer Credit Act, with part of the remaining interest rebated. The lender includes the settlement figure in the new mortgage and ownership of the car transfers to you when the finance company is paid.
What happens if my car is worth less than the finance?
The shortfall, known as negative equity, is simply borrowed as part of the remortgage and repaid over the mortgage term with interest. That is worth a hard look, since you are borrowing against your home to cover depreciation. Voluntary termination may be a cheaper exit on HP or PCP.
Does the mortgage lender pay the car finance company directly?
Often, yes. Many lenders make repayment of the consolidated debts a condition of the offer and instruct the solicitor to settle them from the advance on completion. Others release the funds to you and rely on your undertaking to clear the agreement.
Is it cheaper to remortgage or take a secured loan to clear car finance?
A remortgage usually has the lower rate and the lower monthly payment, but it spreads the car over the full mortgage term. A secured loan can be taken over a shorter term that matches the car's useful life, which often means less interest overall even at a higher rate.
Should I hand the car back instead of remortgaging?
If you have paid at least half of the total amount payable under an HP or PCP agreement, voluntary termination lets you return the car and owe nothing more, apart from mileage or damage charges. It avoids borrowing against your home, at the cost of losing the car.
Does checking my options affect my credit score?
No. Checking your options will not affect your credit score. Equiclear does not search your credit file, and any check the broker makes at this stage is a soft search, which other lenders cannot see. A full mortgage application later on is recorded in the normal way.