A Guide to Refinancing Two Car Loans into One

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Learn to Turn Two Car Loans into OneOscar Wong - Getty Images

Refinancing your car loan allows you to exchange your current debt for a new loan. Typically, the outcome is a lower monthly payment thanks to a lower interest rate or better terms.

Refinancing can be a great option for someone who is struggling to make their monthly car payment or has improved their credit score since taking on the debt. With a lower monthly car payment, you can take the extra money each month and put it toward paying off the loan sooner or paying down other debt.

If you have two cars that both have loans, you may want to know if you can refinance those two car loans into one. This is a good question, as making two monthly loan payments can increase the risk of missing a payment or being late.


This guide answers the question, "Can you refinance two car loans into one?" and discusses the advantages and disadvantages of doing so.

Thinking of refinancing? Easily compare rates from lenders below.

Refinancing vs. Consolidating Debt

First, let's discuss the difference between refinancing a loan and consolidating a debt. When you refinance a loan, you pay off your old loan with the money you borrow for a new loan. Most people do this because they can get a better interest rate that helps lower their monthly payments.

Keep in mind that lenders are less likely to refinance your car loan if you're upside down on the loan, which is where you owe more than the vehicle's fair market value. You must also have had your car loan for at least a year before a lender will consider refinancing.

Consolidating debt, on the other hand, is when you combine multiple debts into one. People often consolidate mortgages, credit card debt, and car payments into one debt load.

This means they only have one payment each month, which sometimes allows them to secure a lower monthly payment. Debt consolidation isn't for everyone, so it's a good idea to calculate the current interest on your debt before you decide to consolidate two car loans into one. Sometimes, consolidating won't save you money in the long run.

Can You Refinance Two Car Loans into One

When you combine two car loans into one, you're actually consolidating the debt, not refinancing. Although both options have a similar outcome, you can't combine loans when you refinance, as you're just trading one loan for another with better terms.

So, while you can't refinance two car loans into one, you can consolidate that debt so that you're only making one payment a month rather than two. You may also be able to roll all your debt load into a debt consolidation loan so you only have a single monthly payment.

Advantages of Consolidating Car Loans

If you're thinking about consolidating two car loans into one, you may be interested in finding out more about the benefits of this strategy. You may decide to consolidate your car loans because you want to avoid having multiple car payments each month, especially if your car payments are due on different days.

The benefits of consolidating two car loans extend beyond simply reducing the number of bills you have. Here are some of the other benefits you can expect:

  • Better budgeting: It's easier to keep track of your budget when you only have one debt payment to make each month. When you can see the amount you owe in a single bill instead of multiple bills due at different times each month, you can better track what you're spending and take control of your spending habits.

  • Reduced payments: Consolidating two car loans into one means fewer payments to make each month. Even if the amount you pay is the same, you'll have a single car payment rather than the hassle of making multiple payments each month, which increases the likelihood that you'll be late or miss a payment.

  • Lower interest rate: In some cases, you may be able to get a lower interest rate when you take out a debt consolidation loan. Your monthly payments will be lower if you qualify for a lower interest rate.

  • Faster debt payoff: Combining your debt into one loan can help you pay the debt off faster. If you choose a shorter term to repay what you owe, you could be out of debt sooner than you thought.

  • Improved credit score: If you've been late on your car payments because you struggle to make the payments each month for some reason, this can affect your credit score. Consolidating your car loans could help you make your payments on time, improving your credit score.

Disadvantages of Consolidating Car Loans

While consolidating two loans into one has many benefits for your budget, there are some disadvantages to consolidating two auto loans. It's good to be aware of these downsides before consolidating multiple loans. Consider the following disadvantages before you talk to your lender:

  • Longer repayment time: Consolidating car loans may reduce your monthly payments but at the cost of extending the length of the debt. For example, if you have one car loan that you're set to pay off in a year and another one that still has three years on the note, combining the loan means you won't pay off the first loan in one year because the two loans will be tied together.

  • No reduction in interest rate: You won't always get a better interest rate when you consolidate debt. In fact, many debt consolidation lenders charge an interest rate of anywhere from 6% up to 36%. So if you're on the higher end, you may end up paying more interest on your debt if you consolidate.

  • Similar monthly payment amount: Depending on your credit score and other creditworthiness factors, you might not reduce your monthly payments by consolidating your debt. Therefore, if this is your main goal when combining two car loans, it may not be worth it.

  • Combining collateral: Another downside to consolidating debt is that you're combining the collateral for the loan. This means that, for example, if you wrap your mortgage up in your debt consolidation loan, your home is now tied up in the debt consolidation loan, which can be risky if you default for any reason.

How to Refinance Two Car Loans into One

To consolidate your two car loans into one payment, follow these steps:

1. Check Your Current Loan Terms and Agreement

Look over your current car loan agreements. You need to understand what fees might be due if you decide to pay off your car loans early, what interest rate you're paying now, and what the payoff amount is. This can help you decide how much, if anything, you'll save by consolidating your debt.

2. Calculate the Cost of Consolidation

Once you know the amount that will be due when you pay off your current car loans, you can calculate what you might save by consolidating them into one. If the fees associated with the payoff are high or you don't qualify for a lower interest rate, then debt consolidation might not be your best option.

3. Get Quotes from Lenders

Getting quotes from multiple lenders lets you compare rates and terms to ensure you're getting a good deal. Debt consolidation only makes sense if it helps you get into a better financial position. You'll also be able to choose the lender that offers you a loan that fits your budget and financial goals.

4. Choose the Right Financing

Choosing the right financing is much easier when you have more than one lender to choose from. Weigh the terms, interest rate, and monthly payments against your current situation to find financing that suits your needs.

If your only goal is to get a lower monthly payment, you may opt for a different financing option than someone after a better interest rate or a shorter repayment length.

5. Apply for the New Loan

After you've reviewed your budget and explored your options, you can apply for a new loan. The lender will want to know about the car loans you're interested in combining, your credit score, your payment history, and other factors related to the risk of lending to you.

6. Make Your Monthly Payments

Once approved for the new loan, ensure you make your monthly payments on time. This will help your credit score and improve your ability to get a loan in the future. It's also important because if you default on a debt consolidation loan, you risk losing both vehicles instead of just one, as the lender can take any collateral you put up for your loan.

Cost of Refinancing Two Car Loans into One

Be aware of any fees associated with refinancing a car loan or consolidating debt. Your loan may have a penalty for early repayment, which you'll have to pay if you switch to another loan since you're technically paying off that debt. In addition, some lenders offer a special interest rate when you get a debt consolidation loan through them, but these rates often increase after a certain period.

Ensure you fully understand the costs of combining two car loans into one before you go through with it, as these offers aren't always as good as they appear on the surface. You must also consider the interest you'll pay on the debt over time. Unless you're getting a better interest rate, you may end up paying more to borrow the money than it would cost to stick with your existing car loans.

You can combine two car loans into a single monthly payment, but this isn't considered refinancing. Instead, you're consolidating the debt, and you can actually combine a number of your monthly payments into a single loan.

However, you need to be aware of the pros and cons of consolidating debt, as it's not always the best option in the long run.

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