Refinancing Your Car Loan
Did you recently buy a new car and now find yourself struggling to make the payments? Don't think that you're stuck with high-interest payments until the your vehicle is paid off. Depending upon the situation, you might qualify for an auto refinance. Here's what you need to know.
Why Refinance?
There are a few of reasons that refinancing a car could be a smart move. First, you may have obtained your loan when interest rates were much higher. Refinancing could help lower your monthly payments, allowing you to keep more money in your pocket. Refinancing may also allow you to pay out less money over the life of the car.
Credit Scores Matter
You also can expect to see a benefit from refinancing if your credit score has improved since you purchased your vehicle. A high credit score can help you qualify for the best refinance rates. Having a credit score below 600 probably won't result in an auto refinance, and you would probably benefit more from working on cleaning up poor credit than refinancing.
Get your hands on a copy of your credit report before shopping for refinance rates. Correct any mistakes and have outdated information deleted. Read through your credit report carefully because it's not uncommon for people to find mistakes.
Pay Off Loan Faster
In some cases, you may choose to refinance an auto loan to get a lower interest rate and monthly payments, but keep on paying the same amount each month. The advantage to doing this is that you can pay off the auto loan much faster than you would have with the original loan.
You may be tempted to refinance your auto loan for a longer period of time to lower the monthly payments. Keep in mind that doing so means you could actually end up paying out more over the life of the loan. Refinancing should be done with the goal of lowering your overall costs.
Shop for Refinance Rates Online
It's easier than ever to look for the right deal for an auto refinance. A wide variety of Web sites allows you to compare refinance rates quickly. Keep in mind that some Web sites simply refer you to lenders while others actually loan money. Only deal with reputable lenders to avoid scams. In most cases you need to find a new lender to do an auto refinance. Most auto finance companies are unwilling to refinance their own car loans.
When to Refinance
Don't wait too long to refinance. The older your vehicle is, the tougher it may be to get a good deal. New cars begin to depreciate in value as soon as you drive them off the lot. When you finance a car the vehicle itself serves as collateral. A lender wants to know that your car has enough value to make it worthwhile to underwrite a loan for a refinance.
