Refinancing a car loan can be a great way to save money, sometimes hundreds of dollars a month. Everyone loves to save cash. It’s much better, but even a little bit of savings feels really good. We especially like saving cash when it doesn’t require giving anything more. Then your savings feel like money found. And you pretty much won’t give up on that, will you? So, why doesn’t everyone do this?
First, it takes some research and, frankly, it doesn’t always make sense to refinance. Plus, there are some cases where you just can’t do it. However, if you have not considered the option, it may be time to refinance.
To save money, of course, but saving money can mean different things to different people. In the case of car loan refinancing, there are several ways to approach this issue. First, some people want to lower the total cost of their loan. They notice a drop in current interest rates and say it’s time to save up. They may be interested in using those lower rates to pay off on a shorter repayment loan, moving from a five-year to a three-year loan, for example. In doing so, they may not see a drop in their monthly payments (and may even increase), but a shorter loan period can mean significant savings over the course. Whatever the reason, a lower interest rate is key, and this decline can result not only from general economic conditions but also from a positive change in the circumstances of individual lenders.
There are also people who are interested in refinancing primarily by reducing their monthly payments, whether or not they will reduce the total cost of the loan. This is most often the case for those who have faced financial problems of one kind or another and found themselves needing to achieve less in the short term.
In a way, this is a flip side of the transition from longer to shorter credit. Here, the borrower may want to extend the loan period for immediate monthly savings. If this is a reason for refinancing, however, be very careful. You will probably pay a lot more in total by completing the loan and ending up with an older vehicle with a significantly lower sales value.
How to Refinance?
The automatic refinancing process is relatively easy, at least compared to refinancing a home or getting an initial car. You need to have a clear understanding of the present value of your car, the amount you owe on your loan, your credit score and your current loan rates. Then it’s about putting in some time and effort to find the best deal.