There are some definite advantages to refinancing your current car loan, and they all have to do with managing your money more effectively. The Pros and Cons of Refinancing Your Auto Loan Still, if you can secure a new loan that is even a single percentage point cheaper than your current loan you can save a significant amount of money, especially if the remaining balance on your existing loan is fairly substantial. You first have to find a lender who is willing to underwrite a new car loan that gives you a lower interest rate, as well as offering more manageable repayment terms. Essentially, you are using a new, and more favorable, loan to pay off the loan you have now. Refinancing an existing car loan is a relatively simple process. However, refinancing a car loan does have a downside, and it is important to understand both the advantages and disadvantages before you put pen to paper.
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Refinancing allows you to secure a lower interest rate on your loan, reduce your monthly payments, and even free up some much needed ready cash. But did you know that you can also refinance an existing auto loan?Īuto loan refinancing offers many of the same benefits as home loan refinancing (albeit on a somewhat smaller scale), and under the right circumstances can be a real boon to anyone diligently working away at a high interest car loan. Frankly, it's pretty hard to avoid those mid-afternoon and late night television ads championing the benefits of home equity loans, and promoting the financial advantages of refinancing an existing mortgage. Renewal fees and cycles vary by state.No doubt you've heard about the benefits of refinancing a home loan.
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You’ll also pay to renew your registration every one, two or three years. To legally drive your vehicle you must pay registration fees, documentation fees and taxes that you’ll pay when you purchase the car. If you’re unsure of how much to budget, visit to view the fuel economy or gas mileage and projected annual fuel costs for the year for the make and model of the vehicle you select. Use Edmund’s car maintenance calculator to get an estimate of how much you’ll spend to maintain your vehicle.
These costs can start at around $100 per visit but vary by the make and model of your vehicle. Make sure you understand car insurance rates and the b est car insurance companies available in order to select the best car insurance coverage for your needs. So, you can expect an older car to carry higher rates.īeyond the cost of monthly car loan payments, vehicle ownership costs can add up. Vehicle age. An older vehicle can carry additio nal risk of issues for both you and your lender.This means you can still benefit from a competitive rate if you have a strong profession or educational background - with or without a perfect credit score. Education and work history. Many lenders are expanding underwriting criteria outside of the sole measure of your credit score.But a longer-term loan will decrease your monthly payment. Loan term. Typically, a longer-term loan will equate to higher interest rates and more interest paid over the life of the loan.Vehicle down payment. Putting down a large down payment will not only bode well with lenders but will decrease the amount you are borrowing - saving you more money down the line.Very simply, the lower your credit score is, the higher your interest rate will be. Your credit history. Lenders use credit scores to measure the risk that borrowers carry.Consider these aspects and how they will affect loan approval and rates: While it is true that the interest rate you will receive varies depending on the lender and is somewhat out of your control, there are still choices you can make to increase approval. What factors contribute to auto loan interest rates?
If you find a few lenders that you like, see if they offer preapproval - going through this process will let you see which rates you qualify for without affecting your credit score.
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