Car loan consolidation involves taking out a new loan to pay off two or more of your existing car loans
. You might choose to combine your debts to pay less monthly, lower your interest rate, or even improve your credit score. There are countless ways to approach it and numerous places that offer car loan consolidation, so it’s important to do your research beforehand. Depending on your current situation, it might just be the best possible choice for you (and your wallet!)
If you’re considering taking this route, the car insurance
comparison and broker app Jerry
is here to help with everything you need to know about car loan consolidation. We'll also help you lower your insurance costs with our trusted quote comparison app. How do I consolidate my loans?
Before you can start consolidating your loans, you need to gather all the information that you have on your current outstanding loans. There are sometimes penalties for paying off certain auto loans early, so be sure that doesn’t apply to you before continuing.
For every auto loan you have, you’ll want to confirm:
If you’ve taken out a loan, you know that most lenders will prefer if you have at least 6 months of employment. They also tend to look for a stable residency when assessing potential borrowers.
And if you’re looking for loan consolidation for multiple vehicles, ensure beforehand that all of them are covered by insurance. This process can be simplified by finding insurance that offers multiple-vehicle discounts—and can also secure you more savings!
Luckily, most banks and loan institutions will allow you to apply online. This can help make researching your specific loan policies and expectations easier, and simplify the application process itself.
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The pros of car loan consolidation
There are a number of factors that might sway you towards consolidating your auto loans.
By combining multiple car payments under one umbrella loan, it becomes far easier to keep track of your payment day(s).
Having more consistent payments can help to improve your credit score as well, which could qualify you for interest rates that you previously weren’t privy to.
And depending on who you choose to consolidate your loan with, there are other possible benefits:
If you consolidate your car with an auto lender, combining multiple auto loans may let you take cash out (known as cash-out refinancing)
If you consolidate your car with a home equity loan
, you won’t have to worry about your car getting repossessed (since the collateral is on your house) If you consolidate your car with a personal loan
, it converts to unsecured debt, meaning you won’t lose your car if you default.
MORE: What is a good credit score for a car loan?
The cons of car loan consolidation
On the other hand, there are a number of negative consequences that may arise if you choose to consolidate your auto loans.
Lenders will charge interest fees based on differing factors, and if your credit score has dropped
, they may offer you an APR that is the same price or more expensive than your current loans. And consolidating your loans may lead you to put off your payments, stretching a temporary debt into one that you’ll have to pay out over your lifetime.
Better interest rates aren’t guaranteed, so be sure to shop around a bit to find a loan that actually does end up saving you money.
Again, there are additional disadvantages that may arise depending on who you choose to consolidate your loans with:
If you consolidate your car with an auto lender, you can end up losing both cars if you default
. If you consolidate your car with a home equity loan, your house may face foreclosure if you stop paying your loan.
If you consolidate your car with a personal loan, their repayment periods are often far shorter than auto loans.
Finding affordable car insurance
Whether or not you choose to consolidate your auto loans is entirely dependent on your current circumstances and financial situation. It can be frustrating and difficult to find guaranteed savings when searching for loan consolidation.
One way to ensure savings elsewhere is by using the car insurance comparison app Jerry
to find policies tailor-made for you. As a licensed insurance broker, Jerry does all the hard work of finding cheap quotes from the top name-brand insurance companies and buying new car insurance. Jerry will even help you cancel your old policy.
No long forms, no calling around, no hard work. You get all of the savings and coverage with none of the hassles!
“This was so easy! Signing up with Jerry
saved me $499 on my semi-annual insurance. As if it was nothing!” —Kache P.
MORE: Does refinancing a car hurt your credit score?
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