Debt Consolidation

Can Debt Consolidation Help With Car Loans? A Look at Your Options

While debt consolidation can help with car loans, it's vital to carefully consider the interest rates involved.
Bruce Hodges
November 6, 2023
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Can Debt Consolidation Help With Car Loans? A Look at Your Options

Debt consolidation can help with car loans, but it depends on the situation.  iIt's important to note that while a car loan can be included, it’s really all about  the interest rates you're dealing with.

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, I often get asked whether a car loan can be included in debt consolidation, and if debt consolidation can help with car loans. 

Let’s go over how the process works, how it may or may not be able to help, and the pros and cons of consolidating that you’ll need to know. 

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, 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%.

Understanding Car Loans 

‍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.

Does Debt Consolidation Work for Car Loans?

Yes, debt consolidation can include a car loan. But the real question is: Will it help? To answer this, you need to consider a few things. First of all, it’s important to know and compare the current interest rate you’re paying for your car loan, and the potential interest rate a debt consolidation loan could provide. Usually, car loan rates are lower and thus won’t make sense for debt consolidation. However, if your rate is unusually high, the car loan is part of a larger debt issue, or you’ve built up equity– a car loan could be the right choice.

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:

  • If your car loan has an unusually high-interest rate due to credit issues or a subprime loan.
  • If you're struggling with multiple high-interest debts, and consolidating your car loan can simplify your payments and financial management.
  • 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.

The Pros and Cons of Consolidating Your Car Loan


  • If you have a high interest rate on your car loan, debt consolidation could help to decrease your overall interest rate.
  • If your car loan is one part of a larger high-interest debt problem, debt consolidation could help to simplify and lower your overall interest rates.
  • If you struggle to make payments and keep up healthy financial habits, consolidating your car loan with other debt could help you stay on track.


  • If your car loan interest rate is lower than your debt consolidation loan interest rate, you may not gain any significant advantages. If the math doesn’t add up here, it’s probably not a good idea!

What Else Can You Do To Help With a Car Loan?

If you’re finding yourself struggling to keep up with a car loan, debt consolidation could be the right option for you. We encourage you to reach out and check if Parachute could be right for you. However, it’s not the only option! There are other strategies you can employ to help relieve the stress related to your car loan. 

Here are a few places to start:

  • Review and understand your loan. Be sure to understand what you owe, your due dates, and the interest rate you are paying. You should also know the pay off date, as this can help to keep you motivated and looking towards the future.
  • Try to align due dates with pay dates. Ensure that paying your car loan on time is a top priority, and avoid missing payments. You can even put these important dates in your calendar to be sure.
  • Understand your fixed expenses. Your car loan is a part of your fixed expenses, and a crucial aspect of your overall budget. By understanding your fixed expenses, you can avoid overspending and missing a payment.


While car loans can be included in debt consolidation, it's vital to carefully consider the interest rates involved. At Parachute, 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 $300 per month by consolidating with us, and while a car loan isn't our typical focus, we encourage you to talk to a Parachute 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 to us at or (844) 670-2403

Bruce Hodges
Bruce, Founder and CEO of Parachute, worked for several of Canada’s top Banks, published research for the Canadian Bankers Association, and taught E-commerce Strategy in Wilfrid Laurier University’s MBA program. His first start-up built credit solutions for the likes of National Bank, Fair Isaac, and Ford Credit globally. Prior to starting Parachute, Bruce was COO of Foresters Financial, and EVP Transformation at CIBC, one of Canada’s top 5 banks. Bruce founded Parachute to disrupt the financial wellness space taking on payday, and high interest predatory lenders, with the intent to bring at risk Canadians back from the brink to good financial health.
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