For families with multiple vehicles and multiple monthly car payments auto loan consolidation may be a great choice to help balance the family budget. Consolidating your auto loans can help to make paying your bills easier by not only cutting your monthly payments but also providing a single monthly payment to make rather than worrying about several payments at different times during the month.

What is Auto Loan Consolidation

Auto loan consolidation is the process of taking on a new loan that pays off your existing car loans and provides you with a single monthly payment. This can be a great option if:

  • You have a few different payments you need to pay at different times every month
  • You want to try to lower your payments by getting a better interest rate
  • You want to help improve your credit report by having a single loan
  • You want to help lower your overall monthly payments

You can find auto loan consolidation through traditional lenders such as banks and credit unions, however, you can also find lenders online willing to consolidate your auto loans. An auto loan consolidation is relatively easy to get compared to other traditional loans. Your vehicles are the collateral on the loan which provides some security and protection for the lender which in turn can make it easy to get approved.

Applying for an Auto Loan Consolidation

The most important step in applying for an auto loan consolidation is to gather all of the appropriate documentation you will need to be approved. This should include the details of the original loans including balances. This will let banks know exactly how much you need to borrow which they can then compared to the current estimated value of your vehicles. Once you know how much you will need to borrow you can begin to research lenders to find the best possible terms and rates.
You may also need to provide the following when applying for an auto loan consolidation:

  • Proof of Income - Many lenders will want to see that you’ve been employed for at least 6 months before considering a loan. Being employed for several years will greatly improve your chances for being approved. You will likely need to provide proof of your income including pay stubs. If you are self employed you may need to provide tax returns from the last two years to prove your income.
  • Insurance - If you want a loan on a vehicle you better bet it needs to be insured. I’m not just talking about liability either. Most lenders will require full coverage to protect their investment.
  • Residency - Lenders also want to see how stable you are by determining how long you’ve been a resident at your current address. Most lenders will ask for 6 months of utility bills to help prove residency.

Your Credit and Auto Loan Consolidation

It’s important to try and improve your credit score as much as possible before applying for an auto loan consolidation. This means not applying for any new accounts and not missing any payments prior to applying. The last 2 years of your credit history are the most important. If you have a lot of blemishes on your credit report you may want to wait a year or two before applying for any major financing or credit.