Debt Consolidation

Can a Car Loan Be Included in Debt Consolidation? A Look at Your Options

While car loans can be included in debt consolidation, it's vital to carefully consider the interest rates involved.
Caitlin Carter
November 6, 2023
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Absolutely! It's important to note that when it comes to debt consolidation, not all debts are treated equally, and it all comes down to the interest rates and types of loans you're dealing with.

Title: Can a Car Loan Be Included in Debt Consolidation? A Look at Your Options

Introduction: When it comes to managing multiple debts, debt consolidation can be a lifesaver. This strategy involves combining several debts into one single debt, often with a lower interest rate and more manageable monthly payments. As a personal finance expert at Parachute Loans, I often get asked whether a car loan can be included in debt consolidation. Here’s how the process works, especially considering the typical interest rates you face with car loans versus high-interest debts.

Understanding Debt Consolidation:

Debt consolidation is meant to make your financial life simpler and your debt easier to handle. Some key benefits include one monthly payment instead of several, potentially lower interest rates, and the likelihood of paying off debt quicker. At Parachute Loans, for example, we focus on consolidating predatory high-interest debts — think 46%+ interest rates — at more reasonable rates ranging from 24.99% to 29.99%.

Car Loans and Their Interest Rates:

Now, about those car loans. Generally, car loan interest rates in Canada vary depending on your credit score, the lender, the term of the loan, and whether the vehicle is new or used. Rates can be as low as 0% for promotional offers on new cars, average around 4.5%-6% for standard loans, and climb higher for used cars and borrowers with less-than-stellar credit.

When to Consider Including a Car Loan in Debt Consolidation:

The average interest rate for car loans usually sits well below the rates tackled in our debt consolidation strategies. However, there are times when it may make sense to include a car loan in your consolidation plan:

  1. If your car loan has an unusually high-interest rate due to credit issues or a subprime loan.
  2. If you're struggling with multiple high-interest debts, and consolidating your car loan can simplify your payments and financial management.
  3. If you've built up enough equity in your car to make it a feasible part of the debt consolidation process.

It’s important to do the math. If your car loan is at a lower rate than what we offer for debt consolidation, it might not save you money in the long run to include it. But if you're facing a car loan at a rate that's comparable to our debt consolidation rates, it might make financial sense for you to include it, especially if it helps streamline your finances and potentially earns you up to 10% cashback on your loan by adhering to beneficial financial actions with us.

Conclusion: While car loans can be included in debt consolidation, it's vital to carefully consider the interest rates involved. At Parachute Loans, we are committed to helping you emerge from debt in a better position than you started, with improved cash flow, better interest rates on future loans, and a greater credit score. Our customers save an average of $200 to $1,000 per month by consolidating with us, and while a car loan isn't our typical focus, we encourage you to talk to a Parachute Loans advisor if you believe consolidating your high-interest car loan can be part of a solid financial strategy for you.

Remember, every financial situation is unique. It’s all about finding a balance that helps you manage your debts effectively, ensures you keep moving forward in your financial journey, and ultimately aligns with your long-term financial wellness. If you'd like to learn more about how we can help you with your specific financial situation, please don't hesitate to reach out.

Caitlin Carter
Caitlin Carter, Parachute’s, Head of Customer Success lives and breathes well-being - her passion over the last few years is how well-being is impacted by finances and conversely how finances are impacted by our well-being. She has a 15+ year career helping international brands execute on their global education and development strategy as well as define and monitor their operational KPIs.
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