Car payments are often one of the biggest monthly debts, and a common reason people fail a lender’s debt ratio test. Rolling a car loan into your mortgage can help, with one big caution.
When it can make sense
- The car loan rate is high, for example from dealer financing with poor credit
- The monthly payment is straining your budget
- You’re consolidating anyway and want to clear your debt ratios
The big caution
A car loses value quickly and usually lasts far less than 25 years. If you spread a car loan over a full mortgage amortization, you could still be paying for this car long after it’s gone. Keep paying it off on roughly the original schedule. See why a lower payment can still cost more.
Low-rate car loans
If your car loan has a low promotional rate, it’s often better to leave it alone.
Leases are different
A lease isn’t a loan you can simply pay off. Ending a lease early usually involves buying out the vehicle or paying fees. Ask the leasing company what a buyout would cost before including it.
Check for penalties
Some car loans charge for early payout. Ask.
This article is general information, not financial or legal advice. Lender requirements, rates and fees change and depend on your situation.