Can You Consolidate Car Loans And Credit Cards?

By Bruce Boswell •  Updated: 12/14/21 •  6 min read
Filed under: Credit Cards

If you have credit card debt, auto loan debt, or indeed any other kind of debt from home equity loans to student loans, it can get a bit overwhelming when you are paying off a lot of loans all with varying interest rates. You find yourself feeling spread a bit too thin, and you may start to struggle financially. 

This is a time when most people will start to look into consolidating their debts, combining all of their debts into one big lump sum.

Can You Consolidate Car Loans And Credit Cards

This is most often done through personal loans, these loan types are usable for anything, and you can use them to pay off existing debts, and therefore end up with just one loan that is a combination of all the money you owe. 

Consolidating Your Debts

The idea of debt consolidation is really simple, and while it might sound intimidating, it is simply just the process of combining several debts into one monthly bill.

Just remember that debt consolidation will offer lower monthly payments as you get an extended repayment term, so you will be in debt for longer. Lower interests are also not always guaranteed, depending on certain factors and aspects of your finances you might end up with a higher interest rate. 

There are some other things you will need to think about before you decide to consolidate your loans. But first, let’s go into more detail about how this works. 

Personal loans are the most common way to consolidate your debt. If you had a car loan and credit card debt, you could take out a personal loan to pay off these two debts.

This might work in your favor as you will no longer have to worry about the possibility of collateral damage with the auto loan, and since credit card interest rates are usually very high, you may likely get a lower interest rate.

Once you have paid off the loans via the personal loan, both of the loans are combined into one loan that you pay back to your personal loan provider. 

What To Think About Before You Consolidate Your Debts

Now, what do you need to consider before you think about consolidating your debt? Well, we mentioned lower payments, and lower interest rate guarantees. But, there are other factors too.

Debt consolidation loans will often come with fees for loan set up as well, although this is not always the case, they may include fees for balance transfer, closing costs, and sometimes even annual fees as well.

Consolidating your debts does not mean that you will eliminate debt, and it is different from debt settlement, although both can scam you out of thousands of dollars. 

You should always look into your spending before you decide to consolidate.

Understand why you are in debt, and if you have accrued a great deal of debt due to overspending then debt consolidation probably will not actually help unless you are willing to reduce your spending, or increase your income to match your spending.

This means that making a budget to manage your finances alongside the consideration of consolidation can be very useful. 

What Are The Pros And Cons Of Consolidating Car Loans?

Unlike credit card loans, auto loans will usually have a low-interest rate, however they are secured loans, so there will be collateral i.e. your car.

No loan is a cakewalk, however, secured loans do mean that if you do not pay back your loan in time, then the loan provider can take repossession of your collateral- your car. 

So, when you decide to consolidate your auto loans, what is good about it, and what is bad about it? 


One of the best parts of consolidating auto loans is that it converts it into an unsecured debt. Personal loans are typically unsecured, which means that there is no collateral, and you will not lose your car (or your home) if you default.

However, there will be credit and financial consequences if you stop making payments, they just may not be as savage as losing your car or home. 

It will also reduce your car insurance requirements. The same can be said for home equity loans, as personal loans eliminate the need for the car to be used as collateral.

Without a lender setting minimum requirements for car insurance policies, and so you get more flexibility with your insurance coverage. 


While the pros are great, let’s not ignore that everything has bad factors too. 

An auto loan debt consolidation can mean that your chances of getting a lower interest rate is not as high as you might like. There are many factors that go into determining your interest rate.

However, secured loans offer lower interest rates than unsecured ones because of the collateral. As a result, it can be tougher to score lower interest.

However, if you are combining credit card debt with auto loan debt, the personal loan interest rate may fall in the middle, as credit card loans usually have high-interest rates, so it may actually balance out.

You might also have a shorter repayment period as well, although this is not certain as it will vary, however, it is possible that you will not have as much time to pay off your loan.  

Consolidating Multiple Debts

You can indeed consolidate your auto loans and your credit card debt. Really, you can consolidate any loans, there are no real restrictions.

You take out a loan that will allow you to pay off the loans you owe and in turn you then owe the same amount, instead you just owe it to one institution rather than multiple, also meaning that you only have one interest rate instead of multiple. 

It is not too difficult to do, and it can be beneficial, however, you need to ensure that it is the right decision for you in the situation you are in before you go ahead with it, as it is not for everyone. 

Bruce BoswellBruce Boswell

Bruce Boswell

Bruce Boswell enjoys researching and writing about all things related to investing and saving money. Whenever he has a chance, Bruce loves travelling all around the world with his wife and trying new foods.