Buy 2 Cars One Loan
Buying a car is not easy for a mid-range income earner. Most people rely on financing to buy a car. However, there'll be a time in your life when you'll need to buy two cars, or more. Perhaps, you and your spouse both need cars. Your child might be going to college, and you want them to have a car. Regardless of why you need to have two vehicles, financing will always be your top priority/consideration.
buy 2 cars one loan
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As mentioned above, it is not usual or common to have 1 financing arrangement on two cars in one loan. Most dealers out there would grant an auto loan for a specific vehicle as that particular car acts as a collateral to ensure you pay your loans timely. However, it's easier to get another car but with a different financing arrangement. The thing here therefore is that you'll have two auto loans that may charge different interest rates, payment schedules, and loan terms.
Another alternative that can work to obtain two cars is by getting two separate loans. But isn't that what's mentioned in the previous section? What we talked about in the last section was getting two auto loans. Meaning it's two loan agreements that finance a car. In this section, we are talking about 2 different types of loans.
Instead of getting two auto loans, you can apply for an auto loan and a personal loan. These two loans are different. In the case of a personal loan, you can use the proceeds to buy a car. After all, personal loans can be used for a variety of purposes. Unlike an auto loan, the proceeds are restricted for purchasing a car. Hence, you can use a personal loan to buy a vehicle without bank restrictions regarding its use.
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 won't 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 it's flexible, personal loans aren't 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.
Debt consolidation is the process of combining all your debt into a single obligation. To consolidate several debts, you need to pay off the existing debt by using the proceeds of newer debt. For example, Joanne has three debts: a personal loan from her friend Mary, credit card dues, and a short-term bank loan. All of her obligations amount to $15,000. To consolidate her debt, Joanne gets a new loan in the amount of $20,000.
She then uses the proceeds to pay Mary, her credit cards, and the bank. Now, Joanne is left with only one loan. Hence, she's only obligated to one creditor instead of three. The main benefit you can get from debt consolidation is the convenience of payment. Instead of going to three creditors, you only pay one person.
In checking your current loans' status, you need to look at the outstanding balance, remaining loan term, and annual percentage rates. A likely scenario is that one of your auto loans has been running for quite some time. Then, check the remaining number of payments. If your earlier loan is already close to its final payment, you may just have to keep the status quo until the final payment. But if you still have more than 12 monthly payments remaining, you can consider consolidation.
Now, how can you use the current information to get a debt consolidation? First, get the sum of your outstanding principal balances. Then, compute the weighted-average interest of all your loans. Here's a quick example (note that you can use the amortization schedule given below to do the calculations so you need not get too concerned if the formula is too complicated):
If Martha wants to consolidate her auto loans, she needs to borrow at least $29,970 to pay both loans. Martha can estimate the interest by computing the weighted-average interest rate by using the formula below:
Before going to the financial institution, make sure that you've checked your credit report. How's your credit score? Is it high enough to get a new loan? You can reach out to Equifax, TransUnion, or Experian for a copy of your credit report.
Once you're good to go, you can start looking for lenders. Check out websites of banks, credit unions, or private financial services around your area. Inquire about their lending services. Your goal here is to look for the most affordable loan offer. Do not apply to multiple lenders as this may trigger a hard inquiry on your credit report and adversely affect your credit score.
If Martha wants to save on interest payments, Company A is best for her. However, Company B's offer is attractive if she wants a larger loan, a longer time to pay, and to consolidate the debt entirely.
After consolidating your auto loans, the individual car dealers would have already been paid off. Meaning they cannot repossess your car anymore since you do not owe them any money so there is nothing to default on. However, the new creditor that gave you the consolidated loan may ask your two cars to be collaterals to the new loan. In case of default, the new creditor may penalize you depending on the loan agreement's terms. In a worst-case scenario, your cars can be repossessed since both are collateral to the new loan.
According to NerdWallet, debt consolidation can cause a drop in your credit score. Creditors may be uncomfortable to see a considerable sum of debt to pay off several loans. However, you can recover from it as long as you pay religiously on your current obligations. It'll take several months to recover, but it'll be alright as long as you stay faithful to your course of timely and full payments each time.
So, can you finance two cars in one loan? It is unusual and uncommon for individuals. There are other possible options you can opt for. Auto loan consolidation is a good option if you want a convenient payment system. It is worth it if you are financially capable of paying off your loans. The important consideration is what is the best option available to you based on your current financial situation and what are the consequences if you fail to meet your payment obligations.
Potentially lower car insurance bill. You could reduce your auto insurance coverage.Typically high APRs. A personal loan might charge higher interest than a secured loan.
Equity required. You may not have enough equity in your home for the loan.Credit cardsThough some lenders allow you to pay off a car loan with a credit card, be cautious when considering this option. While some credit cards offer low introductory rates for new card members, those low rates typically last a year to a year and a half. When the introductory period is over, most charge higher APRs than car loans.
Credit card rewards. Depending on the card, a large balance may earn credit card points or other rewards.Potentially high APRs. While some credit cards offer low introductory rates, most charge higher APRs than car loans.
By paying off your old loans, you could also reduce your credit utilization, an important factor credit bureaus use to calculate your credit score. You could further boost your score by making on-time payments on your new loan.
Look at the total amount of interest you would pay over the life of the loan. If you take out a longer-term loan, your monthly payment may drop, but it may amount to greater total interest charges over time even if you are able to obtain a lower APR.
Refinancing your auto loans could offer a lower APR (and/or different terms) without shopping around for a new lender. Though not all lenders allow it, some refinance their own loans. The downside, of course, is having to refinance each vehicle separately, which would leave you with multiple car payments at the end of the process. This takes consolidation off the table, but it might save you money or offer a different type of flexibility.
When shopping for a car, it is common for auto dealers to submit your information to multiple lenders in an effort to find the lowest interest rate and most favorable loan terms. This practice allows you to benefit from lenders competing for your business. The same practice is used for mortgage lending. Each time your credit report is reviewed by a different lender, an inquiry will appear showing who accessed the report and for what purpose.
Experian lists each inquiry into your credit file for two years, so that you have a complete record of who has reviewed your credit history. That said, car loan and mortgage inquiries made within a short period of time will only be counted as one inquiry when calculating your scores. Read on to find out why.
Lenders know that multiple applications for a car loan within a short period of time indicate you are shopping for the best terms, not buying multiple cars. Scoring systems have been designed to reflect that reality.
The practice of counting multiple auto loan inquiries as just one enables you to shop for the best rates and terms without hurting your credit scores. The same applies when shopping for a mortgage loan.
Even if you plan to sell your current car privately once you get a second vehicle, you could face roadblocks when you apply. Furthermore, insurance costs may be higher, and you could be denied credit from other lenders or creditors after taking out the second loan.
There is even more scrutiny when you take out a second car loan. Since you are trying to add more debt to your plate, the lender needs reassurance that you have the means to make timely monthly payments. But if you have a lower credit score or your debt load is high for your income, you could be denied financing.
Creditors and lenders assess your creditworthiness when you apply for debt products. A higher score means you pose less of a credit risk, and you could get approved for a credit card or loan product with favorable terms. But a low score could result in a denial or higher interest rate. 041b061a72