How To Combine Two Auto Loans

Combining auto loans can be one of the best ways to consolidate debts and potentially take advantage of lower interest rates. With a new loan to pay off previous loans, borrowers can conceivably save a considerable sum in interest. Repayment management also becomes a lot easier after combining auto loans. 

You need to have a perfect understanding of your auto loans to take advantage of this method. If you have a very high balance, combining auto loans may not work out the way you expect it to. The process is very similar to car loan refinancing and comes with adjusting the rates and terms of the ongoing loans. 

The Pros

Combining two auto loans will aid you in getting a much more favorable rate. This consolidation might pave the way to the lowest possible interest rate on multiple loans. Over time, this will help you immensely, especially if you have improved your credit since taking on the initial loan.

If you are looking to get out of any loan faster, consider combining your debts. When you consolidate loans for a short term, you can access the following benefits: 

• Interest falls, and the timeline for retiring your outstanding debt can be shortened to a great extent.
• It helps with managing your repayments. In case you have a tough time managing multiple loans, consolidation will solve your problem of ontime repayment.
• Auto Loan consolidation will reduce the amount of money you are spending on monthly repayment or installment. When the term of the loan is extended, consolidating will make the monthly bill more budget-friendly.
• You can avoid trading-in an older car when buying a new car when you combine loans. This way, you can consolidate the balance of the old auto debt and the new vehicle together without having to accept a below market trade-in value.

The Cons 

The following run-down highlights some of the drawbacks of combining auto debts: 

• The primary aim of consolidating existing loans is to lower the overall APR. However, borrowers cannot automatically expect to receive a more favorable interest rate. Lenders will not guarantee a reduced APR during loan consolidation.
• In case your credit has not improved since the last loan was taken, there might not be any improvement in the accompanying auto loan rates offered by lenders. 
• Not many lenders facilitate auto loan consolidation. This might be a big drawback given finding the right lender might not be easy.
• If the factors are not appropriately considered, you might pay a higher monthly payment when you consolidate your loans. 
• Consolidating auto loans can have a temporary negative impact on your credit score. Between retiring older debt and the temporary drop in your score from a hard inquiry, you might get caught in the same loop of not experiencing any rate improvement.
• Steady income is a crucial factor when it comes to combining loans. In the event that you do not have stable employment or income, you should probably avoid this option due to the lower likelihood of loan approval.

The Steps

The following are the steps for combining two car loans into one: 

1. Study and analyze the rates and terms of the outstanding car loans. It would be best if you had clarity about your current loan balance, APR, and the monthly repayments before deciding if this is the right strategy.
2. Make sure you review your credit score and check your credit report for any errors or incorrect entries.
3. Understand the process and make sensible comparisons among lenders which provide auto loan consolidation offers.
4. The repayment process varies by lenders. Figure out the terms, additional fees, and other details of a new loan.
5. Once you are ready to move forward, gather all necessary documentation like your driver’s license, additional identity proofs, pay stubs, bank statements, address proof, SSN, registration documents, car insurance documents, and more. 

Is It For Me? 

It is essential to consider all the relevant factors when determining if combining auto loans is a worthwhile strategy. While evaluating this option, it is very important for borrowers to first understand the real value of the vehicle which is securing the outstanding loan. 

For this consolidation method to prove appropriate, ensure all the requirements are met and that your credit score is excellent. If the price of the combined loan is higher than the amount outstanding, you might not be able to successfully combine the loans. 

Additionally, if the value of your vehicle is below the outstanding loan balance, you may not qualify for loan consolidation. Before jumping into this process, make sure you have the right answers and a clear understanding of your financial circumstances.

Conclusion

The ability to combine two outstanding auto loans depends on numerous factors, chief among them the value of the vehicle relative to the outstanding loans. If successful, a combined auto loan could land you with a single monthly payment with a better APR. 

Even though this method is not as popular as personal loan consolidation or credit card consolidation, it does still have perks for eligible borrowers.