Should I Roll My Current Car Loan Into My New One
Maybe you need a newer, more reliable car, or perhaps you need a bigger car. For whatever reason, youre considering trading in your current car for a newer onebut you still owe money on your current car. As a result, you may be wondering how to deal with your existing car loan.
It’s common for people to trade in their current car when purchasing a new car, and, if the current car is not yet paid off, the dealer offers to roll the current car loan into the new one.
While many people do this, you should carefully consider your options before taking this route. Consider several factors before rolling your current car loan into a new one because this could significantly increase your payments and the amount you are actually paying for the vehicle.
Major Drawbacks Of Having A Personal Loan
Yes, a personal loan can finance your second car. However, personal loans often have limits depending on your credit score and credit history. NerdWallet says that loan amounts can range from $1,000 to $100,000. You may think that $100,000 is more than enough for a car purchase. But, banks wont easily disburse a personal loan of that amount. Even so, a loan less than $100,000 is already quite hard to get approved.
Aside from that, personal loans often have high-interest charges and penalties. Given that its flexible, personal loans arent cheap. And more importantly, personal loans increase your debt which could raise some concerns in your credit history if potential lenders were to review that.
Best For Used Cars: Chase Auto
Chase
Chase Auto offers the security of a stable financial institution with competitive rates, high loan amounts, and a concierge car-buying program that makes it easy to get the best rates and financing options for a used car.
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Pre-qualify with a soft credit pull
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Car-buying and car-management services
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0.25% discount for Chase Private Clients
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Must finance from a Chase network dealer
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New application needed when switching dealers
Chase Auto is the car financing arm of J.P. Morgan Chase & Co., the largest bank by assets in the U.S., and allows users to shop for, finance, and manage their vehicle all from one account.
Although Chase Auto doesnt list rates online, it has a calculator that will allow you to get an idea of your potential rate. Chase also offers generous loan amounts ranging from $4,000 to $600,000 and 12 to 84 months flexible repayment terms.
Chase Auto doesnt require you to make a down payment for a loan, though putting money down can reduce the total amount you need to borrow and your monthly payments. You can also get a 0.25% interest rate discount as a Chase Private Client, which requires you to have a minimum average daily balance of $150,000 in qualifying personal, business, and investment accounts or a Chase Platinum Business Checking account.
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Speak To A Lender Before You Walk Into A Dealership
By speaking to a lender, your assets, liabilities and credit rating would be assessed to find out if youre qualified to get a car loan for a specified amount. Walking into a dealership with pre-approval can speed up the buying process as both parties know you have a fixed limit, so theres less chance of getting a dodgy deal.
Not sure if you should only buy from a car dealership? Read our guide private sellers vs car dealerships.
Can You Sell A Car With A Loan
It is possible to sell a vehicle when you still have a loan, but it adds a few extra steps. There are a few different options in this situation. One option is to pay off the loan in full before selling the vehicle, which involves contacting your lender to determine your payoff amount. After paying off the loan, your lender will release the lien.
You can sell a vehicle that’s financed without paying it off by selling it to a private buyer or trading it in with a dealer.
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Can You Get A Second Auto Loan
The answer is yes! You can have two car loans at one time, but you must be mindful that it may be more difficult to qualify for a second loan. Lenders will only approve you if your income and debt can handle the added monthly expense. In addition, you will need good to excellent credit to receive a low APR. Without a solid credit score, you may encounter higher rates and get approved for a lower loan amount, which may set limitations on what type of car you can afford to get.
Can I Get A Car Loan With Bad Credit And No Money Down
The average down payment on a car was 12% as of 2017. It is possible to get a car loan with bad credit and no money down, but it may not be your best option. Even a modest down payment of $100 reduces the amount you have to finance, lowering your periodic payments and total interest costs.
You could receive a higher APR if you insist on no down payment. Nonetheless, bad-credit lenders will try to accommodate you if its impossible for you to come up with a down payment.
The accessibility of zero-down-payment loans depends a lot on the car and the dealership. For example, the dealer might be running a promotion on certain vehicles that includes cash rebates that you can apply as a down payment. Its also easier to arrange a no- or low-down-payment loan on affordable used cars, as they represent less risk to the dealer.
Naturally, you have an excellent chance of acquiring a no-money-down loan if you are trading in your current vehicle. Your equity in the vehicle serves as your down payment and reduces the total out-of-pocket costs for the new purchase.
Another way you may be able to avoid a down payment is to have a loan cosigner who has good credit. The cosigner is an additional resource the lender can tap if you have trouble making payments. Having a cosigner could also allow you to obtain a lower interest rate on the vehicle.
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Getting Ready To Borrow
Investopedia: What information should a car buyer gather up before shopping for a loan?
Morrison: Before purchasing a vehicle, you should do plenty of research. Decide what type of vehicle you want to purchase and use an online vehicle ranking comparison tool to compare reviews and ratings of the models between which you are deciding. Make sure the vehicle meets your needs and ranks high in areas important to you, such as safety, gas mileage, and price.
Narrow your choices before stepping onto the dealership lot. Determine what options are available to you to pay for the vehicle. How much cash can you or should you put down? Use a lease versus purchase calculator to determine which option is better for you.
If an auto loan is the best option, then compare rates from various lenders such as a local bank, credit union, insurance company, and online lenders. To get an accurate idea of rates, you will need to know what your is and how that will affect rates. Check your from one of the three free credit reporting companies by going to AnnualCreditReport.com.
If there are any errors in your credit history, you will want to go through the process to fix those. Then, when at the dealership, see what rates and terms they have to offer, so you are ready to compare loan options. Do not be afraid to tell the dealership what rates are available to you to see if they can beat it.
Apply For Auto Loans From Multiple Lenders
Once youve checked your credit, its time to look at auto loans and lenders, which can be categorized as:
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Large national banks, such as Bank of America or Capital One.
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Local community banks or credit unions.
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Online lenders that only provide auto loans.
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Dealership financing, or through automakers’ captive lenders.
Youll want to compare quotes from the first three types of lenders first, even if you plan to take dealership financing eventually. Your own bank or credit union may give you a preferred rate, especially if you agree to automatic loan payments from a checking account there. You can also compare auto lenders online.
If you want to buy your car from a private party, rather than a dealer or broker, make sure thats allowed by each lender you consider seriously. Some restrict where you can buy your car.
Before you apply for a loan, you should also take time to learn the car financing language you will encounter.
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How Can I Pay Off My Car Loan Faster
There are several ways you can work to pay off your car loan more quickly. You can start making payments every two weeks instead of once a month, for example, or increase the amount of principal you’re paying each month. If you get a large tax refund, you can make a one-time payment to lower your balance. Any of these methods will shorten the life of your loan and lower your total interest paid.
Budget For A Monthly Payment
Figuring out the financing before you visit dealers includes calculating your monthly budget, and figuring out how much of it can go to a car payment without short-changing necessities like housing, food, an emergency fund and retirement savings.
The 20-4-10 rule is a good place to start on what to pay for a car. It means a 20% down payment, four-year loan term and vehicle expenses like the monthly payment, car insurance, gas and maintenance no more than 10% of your gross income.
Dont forget to budget car insurance payments. The more expensive the car, the higher the insurance. Most states require a certain level of insurance in order to register the car. If you finance a car payment, in some states the lender will pay for collision insurance for the life of the loan, but theyll charge you for it.
Also, keep in mind that 27 states charge vehicle excise tax, paid yearly, based on the cars value.
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Can I Get A Second Car Loan If I Already Have One
Although you may have a car, you may be in a position where you need an additional car, one for your spouse or children. If this is the case, you may be contemplating your options. Depending on your finances, you may be wondering if you are able to get two auto loans. Is this even a possibility? We share the answer here.
Try Our Calculator For Yourself
If youve learned anything today, we hope its that its important to weigh all factors when buying a vehicle, either new or used. Our car financing calculator will be a great tool to help you plan your next vehicle purchase.
It can help determine how much money you want to put down . Based on how much your trade-in value is, it can be a great help when deciding what kind of term you want to choose. Note: some interest rates are term-specific, so even if your credit history says you can get 1.99% interest, for example, you may have to choose a certain term length in order to qualify for that interest rate.
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Multiple Vehicle Financing Options
Borrowers generally have two options when it comes to financing the purchase of more than one car at the same time. Each option has benefits and drawbacks you’ll need to consider before making a decision.
Borrowers can either get an auto loan or a personal loan, according to Smarter Loans. You aren’t required to spend a personal loan on a particular type of purchase. Basically, it’s a noncollateral loan granted to the borrower to be spent at his or her discretion. This is different than an auto loan or a business loan, which must be spent on the car or business proposal the borrower provided in the loan application.
To use a personal loan, instead of an auto loan, to buy two vehicles at the same time:
Can You Have Two Car Loans At Once
We found a great car at a great price for our sons first vehicle, but it was a little out of his price range. We wanted him to have dependable transportation that would last him at least through college, so we decided to take out a loan and make payments on the balance. I was a little concerned as we talked with the finance person since we were still making payments on our van. I wondered, âCan you have two car loans at once?â
The answer is, you can indeed have two car loans at once. There are several things lenders look at when analyzing your car loan application, and fortunately whether you already have a car loan isnt one of them. Here are some of the important things lenders do look at:
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Shop Around And Apply
The credit bureaus allow a window of 14 days for consumers to rate-shop this means it wont hurt your credit to apply to multiple lenders for one type of loan as long as you do all applications within two weeks.
Potential lenders could include your local credit union, a national bank or an online lender. Look up what loans and rates lenders offer and apply to several to obtain options and compare them.
Can You Have Two Car Loans At The Same Time
Financing two cars at the same time can be a tad difficult, but not impossible. As usual with every other loan, approval depends on multiple factors such as your credit score, income, debt-to-income ratio, and so on. Here are some important aspects that lenders will consider before moving on with your application.
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Ratio #: Debt To Income
Aside from what you’re spending on housing, lenders also take into consideration your other monthly debt payments. Specifically, they consider your debt-to-income ratio.
Here’s what you need to do to calculate it:
- Step 1: Write down all of your monthly debt payments that extend more than 11 months into the future, such as car loans, furniture or other installment loans, credit card payments, or student loans.
- Step 2: Multiply the number in Step 1 times .35 . Your total monthly debt, including what you expect to pay in PITI, should not exceed this number.
Example for Ratio #2:
You and your spouse have credit card payments of $200 per month, car payments of $436 and $508 , student loan payments of $100 and $75, and payments of $100 per month for furniture you purchased on a revolving credit account and will pay off over two years, for a total monthly debt payment of $1,419.
Multiply your total monthly income of $5,833 per month times .35 . Your total monthly debt, including PITI, should not exceed $2,041. Subtract your monthly debt payments of $1,419 from $2,041. That leaves you $622 a month for PITI. Deduct your estimated taxes and insurance , and you’re left with $386 per month toward principal and interest on a mortgage.
Keep The Loan Term As Short As You Can Afford
A shorter loan term means higher repayments – which is exactly what you want.
In general, the longer it takes you to repay a car loan, the more interest youll pay. It can be tempting to stretch out your loan repayments over a longer period of time, effectively making your monthly repayments cheaper, but youre also paying more in interest for a depreciating asset.
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Use Your Loan Offer To Set Your Budget
Your preapproval offers will state the maximum amount you can borrow, but thats not the price of the car you can buy. You should allow an additional 10% to cover taxes and fees. Use an auto loan calculator to design your loan. Put in your down payment, trade-in value of your current vehicle and lending terms to find the right monthly payment that fits in your budget.
If that payment is too much for your comfort, remember that the preapproval offer is just a limit you can borrow much less if you choose. Its far more important to be able to make your loan payments comfortably, even if the bank says you can afford more.
Review Your Credit Score Before Setting Foot In The Dealership
Paying off your debts and making payments on time can improve your credit score over time, and a good credit score can lower the amount of interest youll pay on your car loan.
Your credit score can also impact the type of car loan you can get. Having a good credit score can make you eligible for some of the upper-tier car loans and a higher loan amount.
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