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.
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.
Follow these steps to find a lender and apply for auto loan consolidation:
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:
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.
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.
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.
Follow the lender’s directions to complete the application. Generally, you’ll need to provide the following types of information:
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.
Follow the terms of your new loan to start making repayments. Consider signing up for autopay to make sure you’re never late.
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.
There are several ways you can benefit from auto loan consolidation, though these are the most common:
Not everyone can benefit from consolidating their car loans. Here are a few situations where you might want to hold off:
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.
If consolidating your car loans isn’t the right choice, consider these options instead:
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.
Is leasing or buying the best option for your next vehicle purchase?
Upstart is now offering auto loan refinancing.
Car loans for borrowers who may not qualify for traditional financing.
This young bank works with dealerships to get you financing.
Could you be eligible for a low APR car loan from this well-known credit union?
If you’re in the market for a car don’t miss out on this guide to buy a car, get all the info you need and a range of loans to help you get into your car sooner.
Rates start as low as 3.49%, but you’ll need good to excellent credit to qualify.
Want to sell your car and pay off your car loan? Here’s what you need to know before you put your vehicle up for sale.
A new financing option for buying used cars online.
Lenders demonstrate some self control as alarming subprime delinquency statistics remind us of patterns pre-financial crisis.
