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How to consolidate your auto loans

6 steps to more manageable repayments.

Updated

Fact checked

Taking out a loan to pay off two or more car loans can help you save on interest and more easily manage your repayments. But not a lot of car loan providers offer this service. And you won’t benefit if your balance is too high.

What is car loan consolidation?

Car loan consolidation is a way to combine two or more car loans into one by taking out a new loan to pay off your current balances. Your new consolidation loan gives you one monthly payment, ideally with more favorable rates and terms.

It can be a great way to manage your repayments. But it’s not as common as other types of debt consolidation, like credit card and personal loan consolidation.

How to consolidate your car loans in 6 steps

Follow these steps to find a lender and apply for auto loan consolidation:

Step 1: Review your current car loans’ rates and terms.

Knowing what you already have is key to making sure you can qualify and that consolidating is actually a good deal. Check with your current loan providers for the following information:

  • Loan balances. Add up your current loan balances to get a rough idea of how much you need to borrow. There’s a chance you’ll need to borrow more if you consolidate before your next repayment — you’ll have more interest that hasn’t been paid off yet.
  • APR. Take the APR for each car loan and find the average. Ideally, you’re looking for a new APR below this average if your goal is to save.
  • Monthly repayments. Add up your monthly repayments. If you’re trying to reduce the cost, you’ll want to aim for a loan with a new rate and term that gives you monthly repayments lower than this amount.
Make sure you won’t pay extra

Car loan consolidation can cost you more if one of your current lenders charges extra for paying off your loan early. Look at your loan contract for any prepayment penalties.

Also, ask about how your interest is added up. If your loan comes with add-on or precomputed interest, it’s cheaper to stick with your current loan. Otherwise, you’ll end up paying interest on interest.

Step 2: Check your credit score and report.

Most lenders have a minimum credit score requirement that directly impacts the rate and terms you qualify for. You can get a free estimate of your credit score from many banks, budgeting apps and some websites — without affecting your credit.

If it’s lower than you thought, check your credit report for mistakes. You can request a free copy once a year from each of the three credit bureaus: TransUnion, Equifax and Experian.

Find a mistake? Reach out to the creditor to have it corrected before you apply for a loan.

Step 3: Compare auto loan consolidation providers.

Car loan consolidation isn’t as common as refinancing. Start your search with a wide range of lenders, like banks, credit unions, online providers and even dealerships if you’re thinking of buying a new car.

After making sure you can qualify, compare factors like rates, terms and loan amounts. If possible, prequalify with a few to get a more accurate idea of the offers you might receive.

Step 4: Fill out an application.

Follow the lender’s directions to complete the application. Generally, you’ll need to provide the following types of information:

  • Current loan balances
  • Current lenders’ names and contact information
  • Proof of income
  • Proof of registration for your cars
  • Proof of insurance on your vehicles
  • State-issued ID
  • Proof of residency

Step 5: Pay off your current car loans.

In many cases, your new lender will reach out to your current providers and pay off your car loan balances for you. But there’s a chance you might have to handle this process yourself. Reach out to each lender to learn about the payoff process to get started.

Step 6: Start repayments on your new loan.

Follow the terms of your new loan to start making repayments. Consider signing up for autopay to make sure you’re never late.

Is consolidation the same as refinancing?

It’s not. Consolidation involves moving multiple car loans into one. Refinancing involves trading in your current car loan for a better deal. They can both help you save, though consolidation has an added benefit of better managing your monthly repayments.

5 reasons to consolidate multiple car loans

There are several ways you can benefit from auto loan consolidation, though these are the most common:

  • Manage your repayments. If you’re struggling with repayments due at an inopportune time — or just want fewer bills to keep track of — consolidation can fix both.
  • Get a better rate. Consolidation gives you the chance to get a lower interest rate on one or more loans, especially if your credit has improved.
  • Lower your monthly cost. Consolidating for a longer loan term can make your monthly bill better fit your budget.
  • Get out of debt faster. Consolidating for a shorter loan term saves on interest and moves up the date for when you’re debt free.
  • Avoid a trade-in. In some cases, you might be able to use consolidation to absorb your old car loan balance and buy a new car without trading in your old one.

When shouldn’t I consolidate?

Not everyone can benefit from consolidating their car loans. Here are a few situations where you might want to hold off:

  • Your credit score decreased. Having a lower credit score since you first borrowed often spells higher rates — if you can even qualify.
  • You don’t have steady income. You might struggle to qualify if you’ve recently lost your job or switched to freelancing.
  • Your balance is too high. If your combined car loan balance is higher than what most lenders offer, you won’t be able to consolidate.
  • You want to save, but already have long terms. In this case, combining your debt will give you a shorter term and higher monthly repayment.
  • You’re upside down on a loan. If your car is worth less than your loan balance, you might not qualify for a consolidation loan.

Can I consolidate with bad credit?

It’s possible to consolidate your car loans with bad credit — and might be a good move if you have a high-interest loan and your credit score has improved. But you won’t have as many options.

Dealership financing is generally off the table, though your bank might be willing to work with you if you’re currently in good standing. Otherwise, online lenders are generally your best bet, since they typically have more flexible eligibility requirements.

5 alternatives to auto loan consolidation

If consolidating your car loans isn’t the right choice, consider these options instead:

  • Auto equity loan. Some lenders like Wells Fargo let you borrow against the amount you’ve paid off on your current car loan to fund a new vehicle.
  • Personal loan. If your car loan is upside down, you can use a personal loan to pay off the balance without having to provide collateral.
  • Refinancing. You can save by trading in your high-interest car loan for a lower rate or better terms while keeping any good deals you already have.
  • Sell or trade in your car. If you don’t need two cars but want a new vehicle, these options let you use the value of your current vehicle to cut down the cost of a new car loan.
  • Tighten your budget. When your balances are too high for consolidation, cut back on spending to focus on paying down your debts so you can qualify in the future.

Refinance your car loans today

Data indicated here is updated regularly
Name Product Filter Values Minimum credit score APR Loan term Requirements
PenFed Auto Loans
Varies
2.99% (Starting at)
Up to 10 years
Active membership with PenFed
Low APR car loans from a well-known credit union.
LendingClub Auto Refinancing
Fair or better credit
7% to 24.99%
From 2 years
Car must be less than 10 years old with fewer than 120,000 miles. Current loan must have a balance between $5,000 and $55,000 and at least 24 months left in its term.
Lower your monthly car payments and save on interest through a fast and easy online application process.
Ally Clearlane
640
3.99% to 7.74%
3 to 7 years
Monthly income of $2,000+, live in an eligible US state, ages 18+
SuperMoney Auto Loan Refinancing
600
Varies by lender
Varies by lender
Car must be less than 10 years old with fewer than 150,000 miles. Fair to excellent credit, an income source, US Citizen or Permanent Resident, 18+ years old
Find an offer and get rates from competing lenders without affecting your credit score.
LendingTree
Good to excellent credit
Starting at 3.09%
Varies by lender
18+ years old, good to excellent credit, US citizen
Compare multiple financing options for auto refinance, new car purchase, used car purchase and lease buy out.
MotoRefi Car Loan Refinancing
525
2.99% (as low as)
1 to 6 years
Must have an income of at least $2,000/month and have a vehicle with less than 100,000 miles.
A car loan connection service for borrowers looking to refinance.
RateGenius Auto Loan Refinance
510
2.99% (as low as)
Varies
Income of $2,000+/month, vehicle has less than 150,000 miles and is no older than 8 years, loan balance is between $10,000 and $100,000, debt-to-income ratio is less than 50%
Connect with a network of over 150 lenders to refinance your car loan.
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Compare up to 4 providers

Bottom line

Car loan consolidation can help you save on interest and the monthly cost. It can also make it easier to manage your monthly repayments by folding them into one. But it’s not the right move if your credit score has decreased or your combined balance will give you repayments you can’t afford. In that case, you might want to refinance your car loans instead.

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