Benefits of Automobile Refinancing

There are many reasons people give for refinancing their cars. Basically though the major reason is to save money. No matter what reason you give for automobile refinancing, at the end of the day what you’re trying to do is put more money back in your own pockets. When you refinance your car loan you can extend the duration or the loan, get a lower interest rate and lower your monthly payment.

Bad credit borrowers have the additional benefit of being able to refinance at significantly lower rates if their credit score has improved since their initial purchase. The better your credit score is the lower your interest rate will be. Why not take advantage of your improved credit by saving yourself some money. A large reduction in your interest rate could save you a huge amount of money each month on your car payment.

Automobile Refinancing Requirements

There are some requirements that need to be satisfied before you can refinance your car loan. To begin, the current value of the car must be greater than what you owe. Lenders will not offer you a $10,000 loan to refinance a car that is only worth $7500. If you owe more than the car is worth you won’t be able to refinance. If the difference is not great you can try to pay down the amount you still owe on the car.

Secondly, the car you’re refinancing has to be less than 5 years old. And finally, the amount still owed on the loan must be at least $7500. Lenders won’t do automobile refinancing for less than that amount.

How Does Automobile Refinancing Work?

It’s really quite simple to refinance your auto loan. First you’ll need to contact your current lender to request the payoff value of the car. Then go online and find an auto loan refinance company and fill out their request for quotation. They will ask for details regarding the vehicle, the payoff and some personal information. In many cases the quote and approval will be instant.

Selecting the Right Automobile Refinancing Lender

Your automobile refinancing needs to be done through a different lender than the current loan. So, it makes sense to spend some time researching various lenders before choosing the best offer. If you simply go with the first offer you could end up leaving money on the table. Take the offer that saves you the most cash.

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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.

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