Can I combine my auto loans?
Combining two or more loans is called loan consolidation. This practice is not common with auto loans, but it is possible. Here is how it works.
Combination of auto loans
Loan consolidation involves combining two or more loans into one new and separate one.
This is more common for borrowers with multiple credit cards or personal loans. Loan consolidation is worth it if one or more of your loans has a high interest rate – combining them could mean savings in the long run. Some borrowers consolidate their loans for the convenience of having only one monthly payment instead of several.
You may also be able to consolidate your auto loans if you qualify. Let’s say you have two auto loans. Suppose you are applying for loan consolidation with a lender and you qualify. The lender repays the two auto loans and creates a new loan for the two balances. It’s similar to refinancing in that you get a new loan deal. Once the process is complete, you only have one monthly payment and one loan to worry about instead of two separate auto loans.
Considerations Before Combining Your Auto Loans
Before consolidating your auto loans, you should take a closer look at your total costs at the end of the term.
If you have a car loan with a very high interest rate This creates exorbitant interest charges, it may be worth combining it with an existing auto loan to save money. This only benefits you, however, if you can get a lower interest rate on the consolidated loan. However, a higher balance could mean extending the term of your loan so that you can afford the monthly payments – which could mean more interest charges in the long run, even if you have a higher interest rate. low.
Auto loans almost always use a simple interest formula, which means you are charged interest on the loan balance daily. The higher your loan balance and the longer your loan, the more interest you pay. Also, since you only make one monthly payment for two auto loans, it can take a long time to pay off the loan.
Before proceeding with a consolidation, be sure to compare the total cost of separating auto loans against their combination. Separating them might actually be more profitable, depending on the current interest rate and the status of each loan.
Other auto loan options
If you do the math and consolidating your auto loans won’t save you money in the long run, it may be worth considering selling one or more of the vehicles, if possible.
If you get a trade-in or private party offer large enough to pay off the auto loan, you can leave the car behind and look for a more affordable vehicle for your situation.
It may also be worth look into refinancing. Refinancing is about replacing your current car with a new one, with lowering your monthly payment usually being the end goal.
Often, borrowers who wish to consolidate their loans or refinance do so to save money on monthly payments. Poor credit is often responsible for higher monthly payments due to a high interest rate, so it may be worth improving your credit score and applying for a car loan when it is in better shape.
Don’t have time to repair your credit but need a vehicle?
Credit repair can take time. If you are looking for a way out of a car loan, but are worried that your credit score will hamper your next vehicle, consider subprime lenders.
These lenders specialize in assisting borrowers with difficult credit conditions. Instead of relying solely on your credit history and credit score, they look at the many facets of your financial stability such as check stubs, utility bills to prove your residency, take a look. your work history, and more. By asking for additional information outside of your credit reports, they can get a better picture of you as a borrower.
Bonus, subprime auto loans are reported to major credit bureaus. This means that your one-off payments improve your credit score, increasing your chances of getting a better deal and / or a better interest rate the next time you shop for a vehicle.
To find a subprime lender, you need to find a special financial dealer who has signed up with them. Most dealerships have relationships with one or more third party lenders, but not all are registered with subprime lenders.
Need help locating bad credit loan resources?
Combining auto loans is not for everyone, and consolidation may not save you money in the long run. For many borrowers, selling one of the vehicles and getting another more affordable car loan makes more financial sense.
Bad credit, however, can hurt vehicle financing. Here has Express auto loan, our goal is to help borrowers find dealers who have low credit resources. We have built up a nationwide network of dealers who have signed up with subprime lenders. Start the search for a special financing dealer in your area by filling out our free auto loan application form, and we’ll do the research for you.