Last updated: September 2026
Yes, you can consolidate a car loan and a personal loan in Canada, usually with one new loan or line of credit that pays both balances off. Whether it is worth doing comes down to one number: the rate on the new loan compared with the rates you already pay. This guide shows how it works, what it costs with real numbers, and when it is a bad idea.
Canadian Debt Relief is an independent Canadian guide to debt relief options — consumer proposals, debt management plans, debt consolidation and bankruptcy — for people who want to understand their choices before they talk to anyone.
What does it mean to consolidate a car loan and a personal loan?
Consolidating a car loan and a personal loan means taking out one new loan, using it to pay off both balances, and making a single monthly payment to the new lender. The Financial Consumer Agency of Canada (FCAC, 2026) describes debt consolidation as combining several debts into one payment, which can simplify your finances and may lower your interest costs if the new rate is lower.
The two loans are different animals. A car loan is secured — the vehicle is collateral, so rates are lower and the lender can repossess the car if you stop paying. A personal loan is usually unsecured, so the rate is higher and depends heavily on your credit score. When you fold both into an unsecured debt consolidation loan, the car lien is paid out and you own the vehicle outright, but debt that used to be secured is now priced like unsecured debt.
What are the advantages of consolidating a car loan and a personal loan?
The main advantages are one payment instead of two, less total interest if the new rate beats the old ones, and a single end date.
What are the drawbacks of consolidating a car loan and a personal loan?
The biggest drawback is that you can easily pay more total interest, not less, because car loans are usually cheap and consolidation terms are usually longer.
Who should consider consolidating a car loan and a personal loan?
Consolidating makes sense when you qualify for a rate below your personal loan rate and close to your car loan rate, and keep the term roughly the same.
- Have a credit score of roughly 680 or higher and steady income, so lenders offer single-digit or low-teens rates.
- Carry a personal loan at 15% or more that makes up most of your debt, so the saving outweighs any rate increase on the car portion.
- Can afford a 36–48 month term rather than stretching to 60–84 months just to lower the payment.
Who should not consolidate a car loan and a personal loan?
You should not consolidate if the only rate you can get is higher than your car loan rate, or if the combined payment is still unaffordable after consolidating.
- Have 0–5% dealer financing on the car, since almost no consolidation loan will match it.
- Can only qualify for an unsecured loan at 20% or more because of a low score or recent missed payments.
- Are also behind on credit cards or a line of credit and could not repay the total within five years — a consumer proposal or debt management plan may fit better.
How much does consolidating a car loan and a personal loan cost?
On an $18,000 car loan at 8.99% and a $12,000 personal loan at 15.99%, each with 36 months left, you pay about $994 a month combined and roughly $5,800 in remaining interest. A $30,000 consolidation loan at 11.99% over 60 months drops the payment to about $667 a month but costs about $10,000 in interest — $4,200 more. All figures are illustrative and rounded.
How do you consolidate a car loan and a personal loan in Canada?
You consolidate by getting payout balances from both lenders, applying for a new loan that covers them, and having the new lender pay the old ones off; it typically takes one to two weeks.
- Get the exact payout amounts. Ask both lenders for the payout balance, the date it is valid to, and whether there is a prepayment penalty.
- Check your credit score and reports. Your score sets the rate you will be offered — our credit score range guide explains each band and how to pull your reports free from Equifax and TransUnion.
- Compare offers from at least three lenders. Ask your bank, a credit union and one reputable online lender, and compare APR, term and fees — not just the monthly payment.
- Run the total-interest math. Multiply the new payment by the number of months and subtract the amount borrowed, then compare with the interest left on your existing loans. If it is higher, shorten the term or consolidate only the personal loan.
- Apply and have the lender pay out the old loans directly. Most lenders send funds straight to your existing creditors so the money cannot be spent elsewhere.
- Confirm zero balances and a discharged lien, then automate the new payment. Get written confirmation from both old lenders, and leave paid-off credit alone from here on.
Not sure which option actually saves you money?
Frequently asked questions
Can I consolidate a car loan into a personal loan in Canada?
Yes, a new personal loan large enough to cover the payout balance will clear the car loan and its lien. It only makes sense if the personal loan rate is lower than the car loan rate, which is uncommon: on a $15,000 car loan at 7.99%, an unsecured personal loan at 10–15% costs more interest, not less.
Does consolidating a car loan and a personal loan hurt your credit score?
Consolidating usually causes a small, temporary dip of a few points from the hard inquiry and the new account, then tends to help within three to six months as on-time payments build and balances fall. The FCAC’s guidance on loans and lines of credit (2026) notes that one payment is easier to keep up than several.
Can I refinance my car loan to pay off a personal loan?
Only if the car is worth more than you owe on it; lenders typically finance up to 100–120% of the vehicle’s value. On a car worth $22,000 with $14,000 owing, a refinance at 8.5% over 48 months could free up roughly $6,000–$8,000 to clear a personal loan at 15% or more, with a new payment of about $500–$550 a month.
What credit score do I need to consolidate a car loan and a personal loan?
Most banks and credit unions want a score of about 660 or higher for an unsecured consolidation loan, and the best rates of 8–12% generally go to scores above 720. Below 660, alternative lenders may approve you at 20–35%, which costs more than keeping the original loans — see our guide to bad credit consolidation loans.
What if I cannot afford the payments even after consolidating?
A debt management plan through a non-profit credit counselling agency or a consumer proposal may cut what you pay far more than any loan: on $30,000 of unsecured debt, a consumer proposal often settles for $9,000–$15,000 paid over 60 months at roughly $150–$250 a month. The car loan is secured and handled separately (you usually keep the vehicle by continuing its payments), and only a Licensed Insolvency Trustee can file a consumer proposal.
After 20 years of structuring multi-million dollar corporate debt facilities and corporate turnarounds in investment banking, Marcus now leads Canadian Debt Relief to apply those exact same balance-sheet optimization frameworks to Canadian household debt.
