Car Loan Refinancing - When To Refinance Your Car Loan
Written by: Carrie Reeder
Want to save money? Lower your monthly payment? Then refinance
your old car loan. Trade in your high interest rate loan for a
lower rate, especially if your credit score has improved. You
can also lower your payments by extending your loan terms,
helping your cash flow.
Trading In High Rates
When rates drop, refinancing makes sense for both mortgage and
car loans. Factor in the length of the car loan though when
deciding whether to refinance. If you only have a year left on
loan payments, then it won't save you money to refinance since
you have paid most of the interest up front.
You can also reduce your interest costs by refinancing for a
shorter term. Reducing your loan by two years can easily shave
over a thousands dollars off your interest charges, even with
the same rate. Once again, you need to look at how long you have
left on your original car loan to be sure you can save money.
Better Score, Better Rates
If you have improved your credit score since you first secured
your car loan, you may find savings in better rates. So even if
rates haven't dropped for the general market, you may still
qualify for better rates.
Besides making regular, on-time payments, you can improve your
score by reducing your debt ratio. Your score also improves when
none of your accounts are maxed out.
Lower Payment, Longer Term
Reduced rates aren't the only reason to refinance. By rolling
over to a longer term, you can reduce your monthly payment. Just
remember that in the long run, you will be paying more for your
car loan. However, when finances are tight, this option can keep
you from defaulting on your loan or other bills.
Before jumping into a refinancing deal, be sure to investigate
financing companies. Compare their APR, ask for free quotes, and
read the fine print. Also check with your original lender to be
sure there are no early payment fees. The best refinanced car
loans are the ones where you save money. Taking the time to
research financing offers will ensure that you find just such a
deal.
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