Refinance you car loan, why and how to do it

Refinance you car loan, why and how to do it? Refinancing a car loan, I thought that only could be done with houses. Yep, many borrowers think the same way and are paying dearly for their mistake. The truth is that your credit was poor when you bought your car you are certain (ok, nearly certain) to make savings on a car loan refinance. This article will look into what car refinancing is, why it might be a good idea for you, what requirements you need to get approved and how to apply for it.

What do you mean by refinancing your loan? Won’t that cost me more?

Refinancing your loan means asking another lender to buy your loan. You will then continue to pay them the monthly payments and interest. There are two main reasons to do this, 1) pay a lower interest rate and 2) increase the capital of your loan. In this article we will focus on the first reason.

As we mentioned above most people don’t think of refinancing their cars, only their homes. However refinancing your car can save you thousands of dollars. When you refinance your loan you are using the new, second loan to pay for your car loan and you then continue paying the refinancing loan at a lower APR. This makes the monthly payments lower which can help you to pay for your car loan quicker.

Ironically it is most urgent you refinance your car loan the worse your credit score is. Dubious car dealers often convince buyers their credit score is so bad (more on that soon) that they cannot get anything below some ridiculous credit card level interest rate like 21% to 25%. These people really need to refinance their car loans as current interest rates have dropped drastically and can help them make huge savings. For instance if you have a 16,500 dollar loan and you change your interest rate from 21% to 7%, a typical change when refinancing, you can save up to seven thousand dollars on a 5 year loan.

Do it now, do it quick!

With refinancing, time is of the essence. The quicker you pay off your car loan the less interest you will have to pay. This is because most car loans (and home loans for that matter) are worked out so that most of the interest is paid in the initial months and years. If you refinance your loan early on you can save much more than if you refinance in later years.

When is it worth my time to refinance my car loan?

Nearly always. If your car loan is over 7,000 dollars (anything else is not worth the finance company’s time) and you find a lending company that will provide a one per cent saving it is worth you refinancing. It is well worth your time to look out for low APR car loans offered for refinance and check with a loan calculator the savings you make.

So whether you have good credit or bad credit, if you have a car loan, there is a good chance that refinancing will save you some serious cash.