by Emily Hechler 
At Alltru, we make getting an auto loan a fast and easy process. How do you manage the upfront and ongoing costs of a car? What about two auto loans? This resource will help you consider some of the options you can take with your car financing so you can get the most out of your car and money.
Getting Two Car Loans
If you’ve determined that two car loans are necessary for your family, you must research before heading to the dealership to make sure you and your finances are ready for this commitment. Go through these steps to ensure you can handle another car loan.
Check Your Credit
When you apply for another car loan, the lender will perform a hard credit check. This check will drop your credit score by a few points. When the lender looks at your credit report, they’ll focus on your credit score and debt to income ratio. Your credit score is a number calculated based on your payment history, amounts owed, length of credit history, new credit, and credit mix. The higher the number, the more reliable you are to lenders, which can help you get a low interest rate. Your debt to income ratio, or DTI ratio, will also be evaluated. Your DTI ratio compares your minimum monthly loan payments to your monthly gross income. Low DTI ratios are signs to the lender that you should have the income to make your loan payments.
Look at Your Budget
Even if you think you’re likely to get approved for a car loan because of your credit score and DTI ratio, you need to look at your own budget to make sure you can really afford another major expense. Look at your needs, wants, saving, and giving and determine how much money is going into each category. Another loan payment will probably impact how much you are using in each category. For example, you could have a personal loan with a $200 a month minimum payment, but you’ve been paying $450 to pay it off faster. The DTI ratio was calculated using the $200 payment, not the $450 payment. Can you pull money from wants and saving to pay for another car loan, or should you only pay the minimum on your personal loan payment instead?
Find Alternatives
If you’re hesitant to get a second car loan because of your current money management, you have alternative options. You may be able to rely on public transportation, biking, or carpooling for a few months to stabilize your finances before adding another loan payment. You can also pay off other debt first to reduce your DTI ratio and make another car loan seem more affordable. You may also find a used car that you can pay for in cash, eliminating the need for a second car loan while still getting a second car.
Refinancing Your Car Loan
If you’ve decided to purchase a car or two, you may end up paying for two car loans at the same time. Have you considered refinancing your auto loans? There are several benefits to refinancing your loans. Plus, Alltru makes it easy!
Before we look at the benefits, note that these apply to you even if you only have one auto loan. It’s possible to refinance a single auto loan and save yourself money now or in the long run.
Consolidate Your Loans
If have two auto loans, you can consolidate your loans into one, larger loan. This changes your payments from two smaller payments into one larger payment. It doesn’t matter where you bought your cars from or if you are currently financing from two institutions, Alltru can merge these loans into one easy payment at The Better Way to Bank.
Lower Your Interest Rate
When you refinance, you may qualify for a lower APR (annual percentage rate) or interest rate on a refinanced loan. If you’ve been making your minimum monthly payments on time, your credit score has likely improved. This can help you secure a lower interest rate. Depending on how you refinance, you could make the same monthly payment except pay more toward the principle instead of the interest. Or, you could have a lower monthly payment where you pay the same toward the principle and less toward the interest.
Shorten Your Term
If you can afford to pay more monthly toward your auto loan, you can shorten the length of your term. For example, you can decrease your remaining term from 36 to 24 months. This will save you more on interest costs in the future when you are car-payment free!
Remove a Cosigner
Did you have a cosigner when you bought your car? Refinancing a car can release them from the responsibility of being accountable for paying off your car in the case that you can’t make a payment. Let’s be real, the less people we have tied into our finances, the better. This is a step toward financial independence.
When I got married, I was going to refinance my car to remove my dad’s name from the title. When I called my bank, they were going to triple my APR! In my situation, it was more cost effective for me to make one large payment to pay off the loan entirely. When you talk to your financial institution about refinancing, they can give you a new interest rate to help you determine if you should pay off your car in full or refinance without your cosigner.
Find Flexibility
While these scenarios are encouraging, you might not be in a situation where you can reap the benefits. If you are struggling to make your monthly payments, you can refinance your loan to help.
You can refinance your auto loan to increase your length term. Doing this will result in lower monthly payments. However, this will result in you paying more toward interest over time too. If you need to refinance to make ends meet or give yourself more wiggle room in your budget, this can still be worth the switch.
Cutting Costs of Your Car Expenses
Refinancing a car loan is just one effective method of lowering your car expenses to save money. There are other practical ways that you can save money on your car expenses without impacting your credit score.
First, consider the necessity of having two cars. Owning two cars might not be necessary if you are single since you can only drive one car at a time. If you and your partner own two cars between yourselves, the second one still might not be necessary. More remote jobs are becoming available, and yours may have even shifted to be remote in recent years. You two may be able to get by without two cars for a while.
Lower Your Insurance Costs
If two cars are necessary for your situation, talk to your car insurance company. Many companies offer discounts when you insure more than one car with them. They can also give you discounts for safe driving. Some agencies give you the option to make monthly payments or pay for six months of coverage at once. The six-month option will cost you more up front. However, the monthly payments likely totals more than the six months at once option.
Carpool with Friends
While you are still paying for two cars, consider carpooling when you can. If you and your partner drive the same direction to work around the same time, commute together to save on gas and wear and tear. If you live near a trusted coworker, take turns driving each week and watch each other save!
Reduce Your Maintenance Costs
You can save money on routine car maintenance by doing it yourself. Many body shops are expensive because of the labor fees and not necessarily the needed materials. I was recently charged $800 for a small engine fix, but the piece cost less than $100! Doing this work at home would have cost me some time, but definitely not $700 worth of my time. While my situation is a little extreme, basic maintenance work such as oil changes and tire rotations are easy to learn. Plus, since these tasks regularly should be done, you can save significantly year after year.
Manage Your Money Well
No matter if you own a car with a loan, more than one loan, or no loans at all, being responsible for a car takes time and money. With these tips, you can be confident in your next financial decision. If you want to refinance your loans to help cut your costs, we’re here to help. Make an appointment online or visit us in a branch when you’re ready to take the next step.
