Car Loans for Debt Consolidation

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Topic Author
Shredder
Posts: 216
Joined: Sat Jan 11, 2014 12:00 am

Car Loans for Debt Consolidation

Post by Shredder »

During my browsing I noticed some suggestions were being made to consolidate debt by using and auto loan from PenFed. Since these loans are marketed toward auto purchases how do you get around that? Do they just hand you a check for the loan amount that you'd like (and are approved for)? They are offering good rates. Would you need to use a refi loan or is there a way to use a new car loan? Has anyone actually done this? How did it work out for them? The auto and student loan debts that I have have an effective interest rate of 2.73%.

https://www.penfed.org/refinance-auto-loan/
https://www.penfed.org/New-Auto-Loan/

Refinance New Auto Loan

Rate Term Loan Amount

0.99% APR* 12 to 36 months $500 to $100,000
1.49% APR* 37 to 48 months $7,500 to $100,000
1.99% APR* 49 to 60 months $10,000 to $100,000
2.49% APR* 61 to 72 months† $20,000 to $100,000

†Rate valid for current & prior model year.

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Refinance Used Auto Loan

Rate Term Loan Amount
1.49% APR* 12 to 36 months $500 to $100,000
1.99% APR* 37 to 48 months $7,500 to $100,000
2.49% APR* 49 to 60 months $10,000 to $100,000

*Edit to include link for new car purchase loan (not refi)
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BrandonBogle
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Re: Car Loans for Debt Consolidation

Post by BrandonBogle »

Penfed offered my a 0.99% $21k check on my then lien-free 4Runner. I used that to pay off my 6.8% student loans. The 4.75% loans I then paid down aggressively till completed about a year ago. Trouble free. I applied online, said I was financing my own car, and got a check in the mail made out to me as well as paperwork to submit to the NC DMV.
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dm200
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Location: Washington DC area

Re: Car Loans for Debt Consolidation

Post by dm200 »

As far as I know, most (perhaps almost all) credit unions will make car loans (at the used car rate) when you pledge the car (lien recorded) on the loan. Some might charge a slight bit more than for purchase.

You might own the car free and clear (paid off the car loan completely) or have "equity" in the car (say value is $15,000 and you owe $10,000). This can be an excellent way to convert high cost debt into low cost debt. Perhaps you are paying 18% on credit cards and could get an 8% used cat loan to pay off or pay down the credit card balance.

For the exact details and mechanics of doing this, contact the particular credit union to find out.
Topic Author
Shredder
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Joined: Sat Jan 11, 2014 12:00 am

Re: Car Loans for Debt Consolidation

Post by Shredder »

BrandonBogle wrote:Penfed offered my a 0.99% $21k check on my then lien-free 4Runner. I used that to pay off my 6.8% student loans. The 4.75% loans I then paid down aggressively till completed about a year ago. Trouble free. I applied online, said I was financing my own car, and got a check in the mail made out to me as well as paperwork to submit to the NC DMV.
Oh, so it just puts a lien back on my car. I was hoping to get both my cars and my student loans paid off and I may not be offered enough money to accomplish that. I don't have a ton of equity in my vehicle at this point. It also wouldn't help me in selling the car since they title would just float over to these fellows. Or would it? There would be a lien on it even if I had the title.
Last edited by Shredder on Thu Mar 20, 2014 11:45 pm, edited 1 time in total.
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BrandonBogle
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Re: Car Loans for Debt Consolidation

Post by BrandonBogle »

In both FL and NC, the lienholder holds the title. I hadn't realized my 4Runner was still titled in Florida until two years after I moved when the last loan payment on it went in. I got my Florida title and though "oops". NC DMV never said anything and continued to renew my NC registration annually. I finally turned in that title when I got the PenFed loan and the DMV sent the NC title to PenFed.

It does make it harder on private party sales, but should be no harder on dealer trade-ins if you ever sell your car before paying off the loan.
Topic Author
Shredder
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Joined: Sat Jan 11, 2014 12:00 am

Re: Car Loans for Debt Consolidation

Post by Shredder »

BrandonBogle wrote:In both FL and NC, the lienholder holds the title. I hadn't realized my 4Runner was still titled in Florida until two years after I moved when the last loan payment on it went in. I got my Florida title and though "oops". NC DMV never said anything and continued to renew my NC registration annually. I finally turned in that title when I got the PenFed loan and the DMV sent the NC title to PenFed.

It does make it harder on private party sales, but should be no harder on dealer trade-ins if you ever sell your car before paying off the loan.
Darn - I don't want to make private party sales more difficult since that is what I am hoping to do at some point. I was hoping to have the title free and clear. I looked into regular debt consolidation but the rates are not helpful to me. They are much higher than what I already have.
Traveler
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Re: Car Loans for Debt Consolidation

Post by Traveler »

Just curious why you thought someone would write you a check ad charge very low interest without you putting up collateral.
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dm200
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Location: Washington DC area

Re: Car Loans for Debt Consolidation

Post by dm200 »

If/when you buy (and finance) a new car at the very low rates offered by most credit unions, one thing to consider (if you have other, higher interest rate debt) is to finance as large an amount as a car loan as you can - then excess funds from that finance can be used to pay down the other debt. This is also a justification for financing a new car for a longer period. With the lower payments on the car loan, you may have more available funds to pay down the higher interest debt more quickly. So, for example, if you purchase a new car for, say, $30,000 and have a trade-in worth $5,000 - finance the entire $30,000 at the new car rate and use the $5,000 to pay down higher interest debt.
seamonkey
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Re: Car Loans for Debt Consolidation

Post by seamonkey »

Shredder wrote:The auto and student loan debts that I have have an effective interest rate of 2.73%.
It sounds like you're doing reasonably well with the historically low interest rates you may already have. You may want to consider each loan individually-- if you have a few 6.8% loans it may make more sense to investigate a lien strategy for those particular loans. Then again, if it's only a few thousand at the high interest rate, you may end up netting about $15 when all is said and done after origination fees and the like.
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