The economy is prompting consumers to look for ways to save money and tighten up budgets. Auto loan refinancing may be one way to put more money back into your hands. Several years ago auto loan refinancing was rare. Consumers accepted the rate they were given and paid high interest rates throughout the term of the loan.
In the past few years it has become increasingly more common to refinance your auto loan because interest rates for auto loans have gone down and continue to remain relatively low.
Even consumers with less than perfect credit are getting lower interest rate auto loans. Low interest rate auto loans means you pay less for the monthly car note, saving thousands of dollars over the life of the loan.
Why Refinance
Auto refinancing is a way to save money. If you have an expensive auto loan or if you desire to reduce your monthly payments then refinancing may be an option for you. Your monthly payments may not dramatically decrease but the total amount of interest over the life of the loan will be reduced.
Borrowers with poor credit often pay higher rates, sometimes up to 20 percent more than good credit borrowers. The higher your auto loan rates, the more you can save through refinancing. Perhaps when you took out the auto loan your credit was not in good shape and you had no choice but to take whatever rate was offered. Your credit score may have improved since your initial loan and you may qualify for a better rate through refinancing.
Who should refinance
Consumers who have improved their credit scores since purchasing a car should consider auto refinance. Your options may have been limited when you the bad credit car loan; however, if you have improved your credit scores it’s time to get rid of that expensive car loan. Consumers with who are leasing and want to purchase the car should also consider refinancing.
Current car Value
Auto refinancing is primarily based upon the amount you need to pay off your current loan. The current value of the car is not as important and a car appraisal is unnecessary.
Where to find a lender
Most banks and credit unions offer auto loan refinancing. A good place to start would be your local credit union as they often use less stringent credit criteria and have lower rates than banks. A good way to compare rates is to search online resources.
Qualifications for refinancing
Most lenders require an amount due of $7,500 and above on your current loan in order to qualify for refinancing. Lenders will also view the age, model and mileage of the automobile. Lenders may also require fees and costs to refinance.
Always analyze the savings of refinancing against the cost of refinancing before you proceed. You don’t want to be in a position where your fees required for the new loan are greater than the money you would save through refinancing. Refinancing may also extend the term of your loan. Longer loan terms generally mean reduced monthly payments but increased costs over the life of the loan.
