Can Car Loans Be Consolidated?

Can Car Loans Be Consolidated?

If your family or you personally have more than one car loan, you might be wondering if they can be consolidated. After all, credit card debt can be consolidated, which comes with advantages like saving some money and dealing with only one due date.

The good news is a car loan in Toronto or anywhere else in Canada can be consolidated with other car loans. While it’s a possibility, that doesn’t mean you should just go ahead and do it.

Consolidation Defined

Perhaps you’ve heard of car loan consolidation but aren’t quite sure what it involves. That’s ok, because it’s best to admit when you don’t know about something, then learn about it so you can move on.

Not everyone knows what car loan consolidation means

With a car loan consolidation, you take the outstanding debt for two or more vehicles and combine them into one lump payment every month. That means no more remembering that the due date for the loan on one vehicle is the 15th of the month and the due date for another is the 27th.

All that car loan debt is combined into just one debt. It’s managed as if the loan were for a single car, with some differences you’ll learn about later. But for now, this is a good, high-level definition of consolidation for a car loan in Toronto or elsewhere in Canada.

Why Should You Consolidate Car Debt?

There are several good reasons for consolidating car loans. If any of the following situations describe what you’re facing, you might want to at least think hard about this option:

You have several car payments with different due dates

Each time you miss the due date for a car loan, you risk the lender reporting your late payment to the credit bureaus. Different lenders have different policies for grace periods and how they report your payments, but this isn’t a risk you want to take. Late payments stay on your credit report, damaging your score and hurting your chances at securing loans in the future.

It’s easy to get turned around about what’s due when, especially when you need to keep track of a house payment, credit cards, utilities, and numerous other bills beyond your car loans. That’s why forgetting to make one payment on time is understandable, but that doesn’t mean the lender will be understanding about the mistake.

Car loan consolidation puts an end to confusing due dates.

You want to lower your interest rate

If you have several car loans and one or more have a higher interest rate, consolidating those debts could lower it to a much more manageable interest rate. As your credit file improves and your credit score escalates, you’re viewed as less of a risk by lenders. Perhaps when you purchased one or more other vehicles, the lenders believed there was a good chance you would pay late or default on payments. Now that you’ve proven you can be trusted, it’s time to enjoy the rewards of your diligence.

With just one interest rate for all your car debt, you could save money versus what you were dealing with on one or possibly even all of your loans. What you’re paying each month will be reduced, so you have more cash flow for other expenses, building up your savings, or whatever else you want.

You want to improve your credit score

When you apply for a loan of any type, like a car loan in Toronto, some creditors are interested in the number of debts you’re carrying just as much as the total amount of debt. By consolidating your car loans, you suddenly reduce the number of debts you’re carrying, just like consolidating credit card debt. It’s a move that can make the difference between getting approved for a loan or getting rejected.

You want more time

If you’re looking for a way to string out the payments on your cars for a longer period of time, a loan consolidation can buy you that extra time. By making the payment period for the loans longer, you effectively shrink how much you’re paying each month. This then increases your monthly cash flow, which can be a wise financial move.

Just remember that this can also mean paying significantly more in interest for the life of the loan. In some cases this makes sense, but other times it’s a poor decision. Whether you choose this strategy or not depends on plenty of factors like your other debts and financial commitments. Sometimes it makes more sense to take care of immediate needs, even if there’s a long-term penalty as a result. The best thing to do is run the numbers and decide for yourself what’s wise.

You want to pay off cars quickly

There’s the other end of the spectrum, people who have an influx of money and want to use that to pay off debts aggressively. When you combine loans for multiple cars, it can allow you to shorten the term of those loans.

That might not sound like a wise idea at first, but there is a distinct advantage for a car loan in Toronto or elsewhere. With a shorter term, lenders will often extend a lower interest rate. In addition, the less time you’re paying on a loan, the less interest you actually end up paying, even if the interest rate stays the same. If you’re able to handle the more aggressive payment schedule, this might be a smart thing to look into.


Since a car loan in Toronto is a secured loan, that means there is collateral that the lender can take if you default on the loan. As you probably already know, the car for which you are getting financing to buy acts as that collateral. If you stop making payments, the lender can send a tow truck to take the car, then sell it to recover some or all of the money you owe. It’s a situation most people will do just about anything to avoid.

With a car loan consolidation there’s still collateral, so that doesn’t really change. Instead of being just one car, though, it’s all the cars that were purchased using the loans. This is something you need to be clear about with a loan consolidation, because some people mistakenly think it’s unsecured debt, like a credit card.

The various cars still act as collateral for the loan

Lenders want collateral which meets certain criteria. Some won’t finance cars beyond a certain age, so you want to find that out in advance, especially if you’re consolidating debt from multiple cars. If one is beyond the lender’s limits for age, that could throw the entire deal off, or make it so you can’t include that loan in the consolidation. In other words, you’ll have an easier time consolidating car loans the newer the cars are. In fact, lenders will base part of the interest rate for the consolidation on the age of the cars being financed, just like any other car loan. This factor affects how much money they can get for if you stop paying and they take the cars to help settle the debt.

Bottom line: you want to always pay your auto loans on time or make arrangements with the lender, whether you’re consolidating or not.

What You’ll Need

Just like with any car loan in Toronto or other parts of Canada, you need to qualify for a car loan consolidation. The lender you use must be comfortable with the situation, including your ability to pay.

That means you must provide different pieces of information before you can be approved for a car loan consolidation.

Proof of Income

How much you make is key to any lender extending credit. If you don’t bring in enough money to cover the payments, you’re not going to be approved. Different lenders have different standards for how many months of income they want to see. If you work a job with steady pay, that detail doesn’t really matter. However, people with cyclical or seasonal jobs will find providing proof of income from a longer period of time is possibly beneficial. Lenders are very upfront about how many months of income they want to see.

This proof of income usually means providing pay stubs from your employer. If you work independently, the lender will want to see proof of income that can be verified by a third party. This is a measure to protect against fraud, since some people will try to claim they have a higher income than reality.

With a consolidation, each person who will be responsible for making the single payment for the different cars must disclose how much they make. That means each person applying for a single consolidation must submit acceptable proof of income. The lender will look at what everyone makes and base the decision on that amount, instead of weighing each applicant separately.

Proof of Insurance

A lender wants to ensure that if something were to happen to the cars that are being financed through the loan consolidation, the applicants could restore them to their proper order. This includes a road accident as well as damage from other sources like vandalism and weather. That means having the proper car insurance to cover these sorts of risks. You’ll need to submit proof that each vehicle is covered by insurance and details about the plan.

Most insurance providers offer a multiple car discount, which helps with the cost of insuring your rides. Shop around for the best deal so you aren’t paying too much, which also boosts your financial situation. Just remember to pay attention to what’s covered and deductibles.


Just like when applying for other loans, a car loan consolidation decision will be based largely on your creditworthiness. Essentially, that’s a measure of how likely you and everyone else included in a consolidation will repay all the money that’s being borrowed.

When you apply for a car loan consolidation, the lender will pull the credit for everyone involved. That means how good you are about paying for credit lines on time will be a factor, along with missed payments, collections, judgements, etc. The prospective lender will see all the credit accounts you currently hold, what type they each are, and the balance owed.

Of course, your credit score is an important part of the process in figuring out if you qualify for a loan, as well as the interest rate that will be charged. That score is affected by the different items in your credit history, so it’s important you know what’s in there and you know your score. If there are inaccuracies in your report, getting those removed or corrected could be the difference between being approved for a loan and getting a rejection notice.

Despite what some people say or believe, you can get a competitive interest rate on a car loan consolidation even with poor credit. Some lenders cater to people with damage on their credit history as a way to help you reestablish yourself after problems in the past. After all, sometimes credit problems are a result of factors that were out of your control, so getting another chance to prove yourself can be golden.

Car Equity

You need to know about how much each car is worth and exactly what you owe for them before you proceed with consolidating a car loan in Toronto with other loans. If you’re underwater on one or more of the loans, it would be a wise move to correct that problem. Some lenders will even require it.

Being underwater is when you owe more for a car loan than the car is worth on the open market. You can look up the value of any car using Canadian Black Book’s website. You just need to enter information about the year, make, and model of your car, plus details like options, overall condition, and mileage.

Your car loan statements will clearly display what you owe. For an up-to-date loan payoff amount, you can call the lender.

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