What Are The Benefits Of Refinancing A Car?
When you refinance a car loan, you replace your current loan with a new one, hopefully with better terms. With an auto refinancing, you can get a lower monthly payment and a lower interest rate, which saves you money in the long run. This can be especially helpful if you had bad credit when you took out the original loan.
Refinancing Your Car Loan Can Save You Money.
The biggest, and really the only, benefit of car refinance loan is that you can lower your monthly payment and save money each month. You can also get a lower interest rate to save even more money over the life of the loan.
If you took out an auto loan when your credit wasn’t so good, you might be thinking about refinancing it. Most likely, your interest rate is higher than the average, and interest charges can add up quickly.
What Happens When You Refinance A Car Loan?
To refinance, you need to make sure that your credit score has gone up since you got the first car loan and that at least a year has passed. If it has, the next step is to look for a lender who is willing to refinance you. You can start with your current lender, but you should also look at what other lenders can offer and compare rates.
Once you choose a lender, you need to decide which path you want to take and what is best for your situation:
- Get a better interest rate. This is the best option when refinancing because you save money in the long run. In this way, both your monthly payment and your total interest charges go down. If you’re not sure your credit score will get you the rate you want, you can increase your chances of getting a better interest rate by getting a cosigner.
- Extend the loan term: If you can’t find a cosigner, your credit hasn’t improved much, or you’re having trouble paying your bills, you can refinance and extend the loan term. You end up paying more in interest when you do this, but it may be the quick fix you need to make your monthly payment more affordable. Once your finances get better, you can pay more each month to lower the extra interest charges and save money on your car loan.
One last thing to keep in mind: not all vehicles can be refinanced. Lenders have specific needs when it comes to the car’s age, mileage, condition, title, and equity situation.
Here’s The Bottom Line
Refinancing an auto loan is a good way to save money. You can’t refinance your car loan right after you sign up, but after at least a year, when you know where your credit stands, you can think about it.
Even though we can’t help you with refinancing here, we can put you in touch with a dealership that has the lending resources to help people with different credit situations get new and used auto loans.