Knowing When To Refinance Your Car Loan

There are many reasons for wanting to refinance your car loan. Perhaps you bought the car a year ago and at that time you had really bad credit. This would mean that you have been given a loan with a high interest rate. You will be paying much more over the life of the loan if you stay with this high interest rate loan. You may decide to look into options to refinance a car loan if you find that your credit has improved. This will help you to save money over the life of the loan and lower your monthly payments as well.

There are many types of people who decide to refinance, and car loan options are out there to help with your decision and get you the best offer that suits you and your needs. There are many people that like to keep an eye on the market and when they see that rates are dropping, they start looking for ways to cash in on that. Refinancing a car loan is a good way to do just that.

Then there are the people that want to pay the car off in a short period of time so they go with a short term loan. Their payments are high but generally with in their means. Unfortunately something may change their financial status and they can no longer afford these high, monthly payments so they would want to refinance the car loan to put more money in your pocket each month. Yes this will extend the life of the loan but the lower payments will help them to make ends meet each month.

Now while there are many good reasons to refinance a car loan, there are many reasons that can keep a person from doing just that. Perhaps you do not owe that much on the loan’s outstanding balance, but your payments each month are higher than what is financially comfortable for you. You find that you are struggling to make the payments each month. You will find that if it is an older car, then you may not have the option of refinancing to help you out. The value of the car is very important when qualifying to refinance. If you owe more than the actual value of the car, then the lenders will most likely not be interesting in talking about refinancing options with you.

Another reason that may keep people from refinancing their car loans is that they just do not want o have the burden of an extended loan. This means that they will be back into a longer term of monthly payments. Yes the payments each month will be lower but the thought of paying for a few more years just doesn’t add up in the long run. If you are thinking of refinancing your car loan, talk with a specialist to see if that is the best route for you to go. They can help you to see if it a good decision for you and your wallet.

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The Many Benefits Of Car Loan Refinancing

When you purchase your new car, car dealers often try to talk you into getting a car finance loan with their in-house financing department. It is often easier and less restrictive to get a loan with dealers than with banks, but the down side is that these car finance loans often come at higher interest rates.

If you decide to use your dealer’s car finance loan, do make sure to negotiate for a lower interest rate. There should be some negotiation room as dealerships usually have several loan sources, each with its own interest rate level, such as the manufacturer’s credit company or the local bank. You should also investigate other sources, such as your bank or credit union.

You should seriously consider a car loan refinancing if you initially did not get 0% to 3% APR from the dealer or the bank. By refinancing your car loan, your current loan is paid off with the new loan coming from a different lender at a lower interest rate. You can now save more money with the lower monthly car loan payments thanks to the lower interest rates. You will also be able to accelerate your car loan payoff in a shorter period of time.

It makes more sense to refinance your loan earlier as the interest is usually paid in the earlier payments. The earlier you apply, the more money you can save. However, if you refinance after the fourth year your savings will not be as much and thus not worthwhile.

When shopping for different refinance car loan packages, make sure to evaluate them not just on the interest rates offered. Compare also other fees related to the loan, prepayment penalties, and the terms for the conversion options. You should also find out the lock-in period for the different loan packages. The lock-in period is the period in which the interest rate quoted to you is guaranteed, and ranges from 30, 45 to 60 days. The longer the lock-in period, the higher the price of the refinance loan.

With your savings from refinancing, you need to put it to good use. If you continue to make the same payment amount, you will be able to reduce the principle owed much quicker. If you lower the monthly payment to the new required amount, you won’t be paying it off sooner, but at least you will be paying less.

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