How to Combine Car Loans
Making two car payments each month is cumbersome for some households. Some people decide to combine car loans to lower monthly payments and streamline the bill-paying process. There are several ways to accomplish this. There are auto loans, personal loans and home equity loans. The amount of money owed on each car and your personal needs will determine which loan option is right for you.
Other People Are Reading
Instructions
-
-
1
Contact your existing lender. Ask if the lender can refinance both auto loans into a single loan. To do this, the amount of loans on both vehicles needs to be less than the value of a single vehicle. For example, vehicle one's loan balance is $5,000 and vehicle two's loan balance is $5,000. However, vehicle one's value is $12,000. When you add the balance of both vehicles, which is $10,000, this is less than $12,000.
-
2
Apply for a personal loan. Another option for combining loans is taking out a new personal loan and roll both vehicle debts into the single loan. Check out on line tools, such as Bankrate.com, to compare personal loan rates.
-
-
3
Ask the lender about a home equity loan. Home equity loans are secured by your home. Since this is a secured loan, the interest rate is usually low. Depending on the lender, home equity loan terms can be stretched out as long as 15 years.
-
4
Select the shortest term that you can afford. For example, if you stretch loan payments out 15 years, monthly payments will lowered, but overall financing costs are significantly higher over the term of the loan.
-
5
Complete an application. After selecting a loan, fill out the lender's application. The lender will need supporting documentation, such as recent tax returns, bank account statements and pay stubs establishing employment. The lender will process this information and approve the loan.
-
6
Sign loan documents. Once the loan has been processed, the lender will set up a signing date. Review loan documents for the accurate interest rate and loan term. The loan will typically fund within three business days.
-
1
Tips & Warnings
Check out credit unions when combining car loans. Credit unions are non-profit. The organization returns profits to members, in the form of lower interest rates, which can assist in securing a better deal on a loan.
Continue making car payments until you've confirmed the loans have been paid in full by the new lender. This will preserve your credit rating.
References
Resources
- Photo Credit luxury car - model toy car image by alma_sacra from Fotolia.com
