You might be able to save money when you own several auto loans by consolidating them into a single account. It is possible to consolidate a single auto loan into a package of other loans, but this works best if you own a home. Before you consolidate, however, make sure the trouble of consolidation helps you out.
Identification
Consolidating a car loan happens like consolidation of any other loan -- by finding a lender willing to give you a new loan big enough to cover your existing car loans. Banks are probably going to be the first place you want to check. You can also consolidate a single car loan into a another loan, such as a home equity line of credit or a personal loan. A HELOC is usually easier to get, because it is backed your equity in the home.
Benefits
Consolidating loans may save you money when you find a creditor offering a lower rate than that on your current auto loan(s). Combining several loans often results in a lower overall payment by extending the life of the loan. Put your auto loan in a HELOC, and you might be able to deduct the interest on your tax return. At the very least, you can reduce the amount of paperwork you receive each month.
Tip
No matter how you consolidate your auto loan(s), collect your monthly car payment bill(s), show them to the lender and see what kind of rates you get. Go to several lenders, and never take the first offer. If you take a HELOC, only borrow what you need, and never take out more than 80 percent of the equity you own in your home. Personal loans require a credit check, so pull your report and clean up any negative items on it.
Warning
Some auto loan lenders charge a penalty -- often equal to the interest rate charge had the loan played out normally. Review your current auto lease for penalties and add them to the amount of money you need for auto loan consolidation -- called the payoff amount. Weigh the cost of any penalties against what you might save in a lower interest rate or taxes.
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