How to Combine Car Loans

Combining multiple car loans can save you money.

Combining multiple car loans can save you money.

If you’re having trouble making the payments on more than one car loan every month, combining the loans might help you to manage your finances more easily. On top of no longer having to deal with multiple loan payments, you could end up with a more affordable monthly car payment and a lower interest rate. Combining car loans can be a practical option gives you a new single loan from one lender.

Contact your current lenders to get the payoff amounts. While not all car loans come with prepayment penalties when you pay off the loans early, many do. A prepayment penalty might apply if you are paying a higher interest rate because of a low credit score or have a loan period longer than 48 months.

Collect all the necessary paperwork before inquiring about consolidating your car loans. Your lender will want to see proof of identity and income. When you apply for a loan, take your last two pay stubs, tax returns for the past two years, your driver’s license and a couple of recent utility bills to prove where you live. You will also need to give the account numbers for your current car loans and show proof that the cars are insured.

Talk to different lenders about interest rates and loan terms. You can try your current lender, but not all companies might be open to refinancing their own car loans. However, if you've been a good customer, they might consider a refinancing. Lender terms vary, so it pays to shop multiple lenders. Generally, banks and other financial institutions are willing to refinance car loans as long as a car isn’t worth less than what you still owe.

Get the loan terms. Besides the interest rate, find the annual percentage rate. The APR takes into account the total annual cost for a loan. Go with a lender who offers you a low APR and fixed interest rate. Credit unions often offer consumers both a lower rate of interest and better APR.

Find out what your monthly payment will be. Do the math to determine whether combining your car loans will give you one lower monthly payment and save you money overall. Normally, you pay more of the interest at the beginning of a car loan. The earlier you refinance the loans, the more money you will save in interest.

Ask the lender to calculate the total cost of combining the loans. Along with the interest and monthly principal payments you make over the life of the loan, there will be additional fees and charges for financing the loan.

Discuss finance terms. Keeping the repayment term for the loan as short as possible will save you money in interest. Think about how high a payment you can afford. Taking out a shorter-term loan will get you a lower interest rate, but higher monthly payments. A longer-term loan means lower monthly payments at the cost of paying a higher rate of interest.


  • Consider a home-equity loan if you’re looking for a lower interest rate than if you refinance your car loans into one. An extra benefit of a home-equity loan is that you might be able to deduct the interest you pay on the loan on your federal tax return. The downside is you are using your home as collateral. If you default on the loan, your home is at risk.

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About the Author

Amber Keefer has more than 25 years of experience working in the fields of human services and health care administration. Writing professionally since 1997, she has written articles covering business and finance, health, fitness, parenting and senior living issues for both print and online publications. Keefer holds a B.A. from Bloomsburg University of Pennsylvania and an M.B.A. in health care management from Baker College.

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