The COVID-19 pandemic, supply chain headaches, and inflation have taken their toll differently on all industries, but few businesses are worse off today than the auto business — just ask Americans looking to buy a new or used car. Even though there has been some reprieve from the prices seen during the pandemic, you’ll still pay more than $25K for a used car — and nearly double that for a new one. However, there might be a solution for Americans looking to tap the value of their most valuable depreciating asset.

The… auto line of credit? Americans are already comfortable leveraging their assets to get a loan — think HELOCs, portfolio lines of credit, or other secured loans — to shore up their bank account, pay down a big debt or do a home makeover. Whether it’s good financial praxis or not — to each their own. But soon, Americans could have a new asset to leverage — their car. Yendo, a credit card “backed by vehicle equity,” is allowing Americans to spend against the value of their vehicle.

• Americans who have a fully paid-off car can unlock credit limits from $450 to $10K, depending on the value, make, and state of their vehicle.
• Even if you still have an auto loan, you can transfer it to Yendo to pbtain a line of credit that can adjust along with the value of the vehicle you’ve already paid off.

What Could Go Wrong?

There’s another name for loans like this — title loans. These loans, as well as other vehicle-secured loans, have been around for a while, sometimes likened to payday loans. Still, Yendo characterizes its offer as a more accessible option for consumers to access “affordable credit” and build credit. It might even do that for some last-resort borrowers but with big risks.

• Yendo says that they accept users from all credit scores, but “affordable credit” is relative — interest rates are much higher than the industry average.
• Further, if you miss a payment, Yendo will reserve the right — as a last resort — to “recover an outstanding balance” by repossessing your car.

Dumb money: If home equity or portfolio lines of credit are questionable decisions at best, just remember — at least you’re borrowing against an asset that generally increases in value. Cars, on the other hand, are a rolling liability. Outside of Americans who can’t access credit services from traditional lenders, it’s likely that Yendo will only speak to Americans who are cash-strapped and have spent well beyond their means on expensive vehicles they didn’t need. For any other credit-worthy borrowers, there are plenty of other alternatives.