While many consumers are familiar with the idea of mortgage refinancing, they shy away from the thought of refinancing an auto loan thinking that it will be a complex process with very little financial benefit. In fact, car refinancing can make good business sense and the process is much simpler than most people imagine it to be.
When You Should Refinance Your Car Loan
If you financed a car at a higher interest rate than is currently being offered, refinancing your auto loan can be a solid decision. When you have a good credit history, you may be able to save yourself $100 dollars a month or more and even pay the car off earlier. Ask yourself the following questions:
How Does My Current Interest Rate Stack Up Against New Rates?
Pull up an online loan calculator and input the remaining balance on your auto loan. Enter the number of months remaining on your loan at your current interest rate. Next, enter these figures at the new interest rate. If the difference is significant, the time spent working with a auto refinancing loan specialist will be well worth it.
How Long Is the Term of Your Loan?
When the term of your loan extends past four years, you are paying a lot of additional interest. By switching early, you can significantly reduce the amount of interest that you pay out over the long term.
What is Your Credit Score Looking Like?
If your credit score has significantly improved since you have purchased your car, you should seriously consider refinancing your car. Each improvement in your score means that you can shave a major amount from the interest each month. When your score rises above 720, you have access to the best loan rates.
When You Should Not Refinance Your Car
Sometimes, refinancing a car loan doesn’t make sense. Check your loan paperwork to see if there is a significant penalty for an early pay-off. In many cases this penalty is so high that you’ll wind up losing money in the process.
Additionally, if a refinancing deal significantly extends the life of your car loan, the chances are good that you will wind up paying more in interest over the long haul.
Refinancing a car loan is a simple process. By contacting a lender, you can significantly reduce the cost of owning a vehicle.