How to Roll Over Your Car Loan

What happens if you want a new car, but you're still paying off your current one? Rather than paying off two separate loans, you might be able to "roll over" your current loan. This is when you add what you still owe to your new car loan.

Rolling over a car loan can be helpful in some cases, but there are drawbacks to consider, too. In this article, we'll take a closer look at how to roll over a car loan and how to decide whether it's a good idea.

How to roll over a car loan

Rolling over into a new car loan

When you roll over your old car loan into a new one, you trade in your vehicle, and any negative equity gets applied to the new loan. Most dealers set limits on your ability to do this.

Rolling over through refinancing

If you don't want to trade in your vehicle but you're hoping to pay less over time, you might consider refinancing your car loan. Rolling over through refinancing only makes sense if you have a better credit score than you did when you got the initial car loan.

If you're thinking about refinancing, look for lenders who offer pre-approvals without doing a hard credit check first.

Pros and cons of rolling over a car loan

These are some of the advantages of rolling over a car loan:

• It allows you to get a new vehicle sooner
• If your credit has improved, your new car loan might have better terms

However, you should also consider the potential drawbacks:

• You'll be immediately upside-down on the new loan
• You'll probably pay more interest on the negative equity over time
• If you repeatedly roll over debt, it's easy to get trapped in a debt cycle

Better credit can lead to better interest rates

If you have better credit when you roll over a car loan, you might be able to secure a better interest rate. To understand how your score affects your rate, review the impact of credit scores on auto loans. If your credit needs work, use an auto loan calculator to model the savings from improving your score before rolling over.

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