Auto Loan Consolidation: A Solution for Multiple Car Loans

Auto Loan Consolidation

Your checkbook can take a beating if you are paying down multiple car loans. Different payment amounts, due dates, and interest rates can make staying on top of your finances challenging. One way to get your finances under control is to consolidate what you owe. Auto loan consolidation is one way to do this. 

What is auto loan consolidation?

Auto loan consolidation involves taking out a new loan to pay off multiple car notes. Rather than making payments on many car loans, you’ll have just one payment each month. Plus, you may get a lower monthly payment and interest rate.

Auto loan refinancing is different than consolidation. When you refinance, you take out another car loan to pay off the one you have now. 

Reasons to consider auto loan consolidation

Auto loan consolidation has plenty of benefits when you owe money on multiple vehicles. 

1. Lower interest rates 

You could save money when borrowing at a lower interest rate than you currently pay. 

2. Simplified finances 

Consolidating your auto loans into one note makes your finances easier to manage. Rather than multiple loans every month, you have one payment when you consolidate. 

3. Improved credit score

Making timely payments on your consolidated loan could raise your credit score. With fewer monthly payment obligations, there is less risk of missing a payment. 

4. Flexible repayment options 

Some car loan consolidation options offer greater flexibility with monthly payments. For example, if you consolidate your auto loans using a credit card, you can decide how much you want to pay each month. 

4 ways to consolidate auto loans

Some financial institutions extend auto consolidation loans. However, there are other ways to consolidate auto loans. 

1. Personal loan

You may be able to take out a personal loan to consolidate your auto loans if you have good credit. With a personal loan, you receive money in one lump sum to pay off multiple car loans. Personal loans don’t require collateral, and you can use the money any way you choose.

The estimated savings calculations are hypothetical in nature and do not guarantee future loan terms or savings. Let’s say you have two auto loans:

Loan 1: $10,000 balance, 7% interest rate, three years remaining, monthly payment $308.77

Loan 2: $5,000 balance, 9% interest rate, two years remaining, monthly payment $229.44

Total monthly payment = $308.77+ $229.44 = $538.21

If you can take out a personal loan to pay off the 2 auto loans, for $15,000 at a 5% interest rate with a three year term your new monthly payment for the personal loan could be ~$449.66 

This would put your estimated savings at: 

Monthly savings = $538.21 -$449.66 = $88.55 saved per month

Annual savings = $88.55 x 12 = $1062.60 saved per year

Total savings over three years = $1062.60 * 3 = $3187.80

MoneyLion offers a service to help you find personal loan offers based on the info you provide. You can get matched with offers for up to $50,000 from our top providers. You can compare rates, terms, and fees from different lenders and choose the best offer for you. You can also use the loan funds to pay off other existing debts. MoneyLion is here to help.

2. Home equity loans

With a home equity loan, you borrow money against the equity built up in your home. Home equity loans usually have a set interest rate and provide a lump sum payment, which you can use to pay off your auto loans. You can consolidate your auto loans into one monthly payment, and you may get a lower interest rate on a secured loan. A home equity loan uses your home as collateral, so you risk losing your home if you can’t repay what you owe. 

3. Home equity line of credit (HELOC)

A home equity line of credit (HELOC) is a revolving credit account where you can borrow against the equity in your home. You can use funds from a HELOC to consolidate multiple car loans into one payment.

With a HELOC, you can borrow money and make minimum payments for a specified time. Once the period ends, your lender may let you make monthly payments. Or your lender could require you to pay the remaining balance due.

Since most HELOCs have adjustable interest rates, your monthly payments could differ. A HELOC uses your home as collateral. If you default on your HELOC payments, your lender could foreclose on your home.  

4. Credit cards

You can pay off your auto loans with your credit card. As long as you make the minimum payment, you decide how much to pay each month. You can help save money with a credit card with a low introductory rate and a balance transfer feature.

Before using your credit card to consolidate your auto loans, pay close attention to the interest rate and fees you pay. Your interest rate may be low now, but you could be stuck paying a significantly higher interest rate when the introductory period ends.

5 steps to consolidate auto loans

Follow the steps below to consolidate auto loans. 

1. Assess current loans

Start by gathering information about your current auto loans. You can check your account online or contact your auto lender to get the current balance owed, monthly payments, and the annual interest rate. Be sure to ask the lender about fees for paying off your loan early. 

2. Find a consolidation loan provider

You can check with your local bank or credit union for loan consolidation options. You can search online for banks, credit unions, or other lenders who offer auto loan consolidation options. 

3. Compare loan terms

When possible, seek multiple debt consolidation loan offers. You can compare the interest rates, payment terms, and fees for the option that best suits your financial situation.  

4. Apply for a consolidation loan 

Most lenders require that you apply for a debt consolidation loan. To complete your application, you should expect to provide such documents as your driver’s license, employment verification, bank statements, and proof of residency. You might provide each vehicle’s registration and proof of auto insurance. 

5. Pay off existing loans 

Contact each lender for instructions to pay off your existing loan. Some lenders accept payment online, whereas others may ask you to mail a check. 

Potential challenges and considerations

Despite its benefits, auto loan consolidation isn’t without its drawbacks.

1. Prepayment penalties

Some lenders charge a penalty if you pay your loan off early. If your lender charges a prepayment penalty, you must factor this cost into your consolidation decision. 

2. Eligibility requirements

Most lenders evaluate your creditworthiness before extending a loan. Lenders may look at such criteria as employment history and how much money you make. Lenders may also have minimum credit score requirements, so if you have bad credit, limited credit history, or a high debt-to-income ratio, you may not qualify. 

3. Long-term financial planning 

Consider your long-term financial goals before you consolidate. If you plan to lower your payment and interest rate to pay off what you owe faster, auto loan consolidation may be a good fit. However, if you want a lower monthly payment but have no real plan to pay back what you owe, you could stretch out your debt for longer.   

Consolidate Your Auto Loans to Better Control Your Finances

Auto loan consolidation can be a helpful financial tool when done with a purpose. When you consolidate, you may lower your payments and get a better interest rate. Yet not every auto loan consolidation makes financial sense, so it’s a good idea to look closely at its costs and benefits. 


Is there a minimum or maximum loan amount required for consolidation?

A lender may set minimum and maximum limits on the amount they will loan you. However, you must borrow enough money to pay off each car loan in full. 

What are the typical interest rates for consolidated auto loans?

Interest rates on debt consolidation loans vary based on factors such as your credit score and whether your loan is secured or unsecured. 

Can I choose any repayment terms for the consolidated loan? 

Depending on your lender, you may have some flexibility with your repayment terms. 

Can I consolidate multiple auto loans into one?

Yes, you may consolidate multiple auto loans into one by taking out a loan or line of credit. 

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