With a simple car loan, if you default on your car payment, a lender could repossess your car - but wouldn't have any title to your house. A bank, on the other hand, might be more prone to send in the debt collectors.Īnd, by mixing together all your debts, all your assets are now equally at risk. Your auto loan lenders may be more than willing to ignore the occasional late payment or negotiate an alternative payment schedule if you hit hard times. A consolidation loan is a big commitment, and a financial institution is unlikely to grant it unless you can prove that you're good for the monthly consolidation payments.īefore you consolidate, remember that your debt consolidator may also be less understanding than your individual creditors. Overall, you should only consider debt consolidation if your credit rating is in relatively good shape and you have no trouble paying off your existing loans. People with high-interest credit card debt are particularly drawn to loan consolidation, but consolidation may also make sense for your car loan if you walked out of the bank/dealership with a particularly costly financing scheme. Secondly, just as with refinancing, a consolidation may allow you to pay a lower, overall rate of interest. By streamlining your debt, you lower the amount of bills in your mailbox and simplify your monthly budget. The first benefit of a loan consolidation is convenience. Read on to figure out how to conveniently bundle your car loan with other debts, and save on your interest payments at the same time. If you inquire at more than three financial institutions, it could end up diminishing your credit score. When searching for refinancing, be careful not to shop around too much. However, a home equity loan can also subject you to higher fees and increased risks: If you default on your car payments, you might be forced to sell your home. You'd get a lower interest rate, and the interest might be tax deductible. You could decide to refinance with a home-equity loan. It's not always necessary to finance your auto with a tailor-made auto loan. car loans, a credit union can typically offer rates up to 1.5 percent lower than banks. Although credit unions are only responsible for roughly a fifth of all U.S. Credit unions, on the other hand, are non-profit and member-owned, which means you'll typically end up paying less than at a bank.

If you already have debts tied up with a bank, the bank might be able to offer you the best refinancing rate. Ford, for instance, generates more than 80 percent of its revenue from vehicle financing. Car makers make lucrative amounts of money off their financing schemes. If you obtained your loan with an auto dealer, you'll likely want to consider refinancing with a bank or credit union. Start by shopping around for a better loan. If, however, your loan is still 'right side up,' you might consider refinancing. Keep reading to find out how you can swap out your original loan for a better deal. Your car will be free and clear much quicker, and you'll save interest in the long run. Should an unexpected cash windfall ever come your way, it's a good idea to put it toward paying off your car loan. Any longer, and it might be a good idea to start considering a cheaper car. Plan to pay off your car within 48 months at the most. Four-fifths of all car loans in the United States last longer than four years - a worrying sign for an increasingly debt-ridden populace. Hopefully you were able to pay a substantial down payment, but if not, it's still possible to speed up the term of a loan - as long as there are no penalties associated with early or extra payments.

Simply put, the faster your pay off your loan, the more money you'll save.

Many institutions will even reward an automatic payment plan by charging lower fees. Provided you keep enough cash in your account, an automatic payment plan ensures that you can avoid the credit dips and late fees associated with late fees. Under this plan, a set amount is automatically drawn from your bank account every month. But if you're looking for the quickest and easiest method, consider setting up an automatic payment plan. You may choose to pay online, or by mailed check, or even in-person at the financial institution. Hopefully, you were prudent when applying for your auto loan so that your monthly payments are about 8 percent of your monthly income.Īn easy way to make sure you pay your car payment on time is by selecting the most convenient payment method. In some cases, that percentage can balloon as high as 15 to 20 percent By comparison, the monthly food expenses of an average American household are only 12.4 percent of total income. Most consumers spend about 11 percent of their monthly income on car payments.

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