Car Loan Consolidation

Posted by: Derrick    Tags:  , , ,    |  No comment

If you are like most people in the wake of the recent recession and the current US debt crisis, you are likely in over your head in some area of your financial life. This is mostly not your fault, but the creditors do not seem to recognize or care anything about that.

If you are anything like most people, you are also worried that if these financial problems overflow into the area of your transportation, you could be in for, pardon the pun, a bumpy ride.

Having a car repossessed is not only embarrassing, but also seems to be grossly unfair. How can one possibly be expected to pay off any financial debts if one can not even procure transportation to get to the job to earn the money to do so?

Fortunately, loan consolidation techniques have also been devised to help those who need help keeping their vehicle.

Here are some of the benefits of consolidating car loans.

What is Car Loan Consolidation?

Consolidating an automobile loan means simply to make many loans one loan, or turning many payments into one lump payment. This is done for many reasons, to be discussed below. Suffice it to say here that consolidating a car loan has proven to be an effective way out of financial distress for many people.

Advantages of Consolidating Multiple Car Loans

– A longer payoff period.

Consolidated loans can be negotiated out to give you more time to pay them off. In return for more interest payments, creditors are able to extend your credit for a longer period of time, which effectively reduces your monthly payment. And as you are paying this amount only once, and not having to sort through numerous bills, you are able to organize your financial situation much more easily until you get back on your feet.

– Better long term interest rates.

Consolidating your loans can also help protect your credit score from the debilitating effects of late payments and defaults. Stretching out your payments into a longer yet more manageable time frame will help keep your payments on time, which will keep your credit score high. You can use this fact to qualify yourself for lower interest rates during the loan consolidation period, which can actually help you save money over the life of the consolidated loan.

Even if the loan consolidation company is not willing to do that, the fact that you are keeping your loan payments on time will help you qualify for lower interest rates in the future, which will certainly help keep you from purchasing over your head a second time.

Contrary to popular belief, your credit ratings can actually improve by properly managing a consolidation loan.

– Better terms from a secured loan.

Many car loan consolidations are done in conjunction with home equity, which changes the loan situation from an unsecured one to a secured loan. Secured loans are of course given much better interest rates than are unsecured loans, and tying a car loan to a home equity situation can help immensely in drawing down the amount of total interest paid on the loan while still allowing for an increased time frame.

This will, of course, help to decrease the monthly payments on the loan, which will help keep the loans on time, which will help the credit score of the borrower, which will help keep down interest rates for future purchases – a cycle of good financial events which feed off of each other.

– Tracking only one payment.

Believe it or not, consolidation in and of itself can help with the peace of mind of the borrower by simply making paying off the loan easy. It is much easier to pay one lump sum to one creditor than have to deal with many creditors over the phone and bills through the mail, and many find this the number one reason to actually consolidate their car loans.

– Great alternative to bankruptcy.

As touched on before, consolidating your loans can actually help improve the interest rates that a borrower recieves and actually increase the credit score of a borrower, unlike bankruptcy, which is an unadulterated black mark on the financial record of a borrower.

Although many may dismiss loan consolidation as somehow shady, the truth is that a properly managed consolidation effort is much preferred to bankruptcy and the stigmas that come attached with it.

The Bottom Line

Finding out the truth about car loan consolidations has helped many people out of a sticky financial situation, while still allowing them to maintain their everyday life and not fall further into a financial hole because of an inability to get to work or perform the tasks of everyday living. Consolidating car loans is a definite alternative for those who may not have the lump sums to pay for their vehicles right now.