There’s no doubt that buying a new car is an exciting and stressful time. Many people get overwhelmed by the whole thing and end up being talked into more car than they need by the salesman. They fail to focus on their own needs and end up with a high interest rate, a high monthly payment or both. If this has happened to you, there’s a way out and that’s through refinancing a car loan.

You interest rate will vary based on many variables from the dealer to the state your in to your credit score to the lender and many other things. I’ve heard reports of people getting car loans for as high as 19% APR which is insane! You might as well finance your car with a credit card at those high interest rates. Your rate can be higher or lower based on the amount your financing and the length of the loan as well, but the best way to lower your rates are to do some shopping to find the best car loan for you.

If you’re already paying a high interest rate on a car loan then you do have several options to lower that rate. The best way to do this is by refinancing a car loan. There are immediate benefits because your monthly payments are lowered, but there are also long term benefits because you end up paying less money in interest to the bank. You can literally save thousands of dollars over the life of the loan by refinancing.

Think of this; if you financed a $20,000 car loan at 11.9% you can reduce the interest rate by just 3% you save yourself $2200 over the life of the loan. Larger loans and larger interest rate deductions will of course mean larger savings and this is when you really benefit from refinancing a car loan. Remember too that you won’t be refinancing the total cost of the car loan, but just the balance due, so your monthly payments will be lower yet.

Now it gets even better, because not only can you lower the payments, but you can also shorten the length of the loan meaning your cars value will be higher when you finally pay the loan off. Cars depreciate quickly, so a years less wear on the car can put several thousand more dollars in your pocket when you trade the car in.

When you do go to refinance a car loan make sure you know how they are calculating the interest. You want to avoid a simple interest loan because in this case they will be charging you interest on a daily basis on the car loan. Find out too if you can pay the loan off early or if there is a prepayment penalty for early payoffs.

You can refinance a car loan no matter what your credit history is like so why not look into it. Even if you save just $15 a month it’s worth it because there are no points to pay on the loan like with a home refinancing. Chances are that you’ll be able to save much more than this when you refinance a car loan though.

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1. When Car Refinancing Makes Sense
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It happens to so many of us when we go car shopping that the excitement of getting into that new car takes over and our emotions end up putting us into a car and monthly car payment that’s more expensive than we planned for. Instead of focusing on saving money and getting a cheap car loan we focus on the excitement and emotional boost that we get from a new car purchase.

Interest rates will vary depending on your lender of course, but some people end up with rates in the high teens which is crazy, even if you’re financing a car with bad credit. There are simple ways to keep your interest rate down, the most important of which is to take the time to compare rates from several auto lenders. You’ll also find that the length of the loan, the amount of the loan and your credit score will have an impact on your loan interest rate.

Once you’re into the new car you do have some options to lower your interest rate and monthly payments. Car refinancing can drop the interest rate by several percentage points and save you thousands of dollars over the life of your loan. And of course you’ll have lower monthly payments which will be a help to your budget.

Think of this, a car loan for 20,000 financed for 60 months at 12.5% will cost you $449.96 a month and $6997.53 in interest alone over the 60 months of the loan. If you refinance the car loan at a much lower rate of 6.99% your monthly payment will drop by over $50 and you’ll save over $3200 in interest. Pretty good reason to look into car refinancing isn’t it? Plus you’re payments are likely to be even lower than that since you’ll be refinancing less than the original $20,000 because you’ve already been making payments on the loan.

The usual financing rate for a new car with good credit is 7.99%, but you can find lower rates on a refinancing because the loan amounts are smaller and the duration is shorter. And you’ll be able to shop around so you could find an excellent interest rate. Car refinancing is certainly easier online and it’s less stressful than the initial purchase finance at the dealership.

You’ll also want to consider the full terms of the loan. Is it possible to repay the loan early in full or will you incur a fee for doing this? Make sure you read the fine print when you’re getting quotes for an auto refinance. You should also know that you can refinance your car even if you have bad credit. You may get an interest rate that’s a bit higher than you would get with good credit, but it should still be lower than the current interest rate, especially if you had bad credit when you initially bought the car.

Car refinancing is just a good financial move. Anytime you can lower your interest rate and save yourself money you should take the opportunity to do so. Even $20 a month can make a difference and you’ll then be able to use that money for something else.

Related posts:

1. Benefits and Requirements of Car Refinancing
2. Is Refinancing A Car Loan A Good Idea?
3. 4 Automobile Refinancing Tips