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REFINANCING YOUR CAR LOAN
Are your interest rates on your car loan
too high? If this is the case, refinancing your
car loan may be a
good idea. Reducing your interest rate by a
point or two can save you hundreds of dollars
in interest over the entire life of your loan.
Your monthly payments will also be lowered as a
result of refinancing.
What does it mean to refinance a car loan?
Refinancing means that you pay off your
existing car loan with a new loan. Your new
loan is generated at a lower interest rate,
with an increased term.
How much does it cost to refinance?
Fees associated with refinancing a car loan are minimal. Usually only title
transfer costs and processing fees.
When is refinancing useful?
Many times, people with
no credit or those that have experienced
bankruptcy will receive high interest rates when
applying for car loans.
Once stability is established by means of a positive
payment history, you can qualify for a lower auto loan
interest rate. Typically, one year of timely payments
should be exhibited before refinancing should even be
Refinancing is also a good option for individuals that
are having a hard time paying their current car loan.
Why? As mentioned, by refinancing you can reduce
your monthly payments by stretching out the length of
your loan. However, if you are in
debt, you are not
going to obtain a lower interest when you refinance.
Therefore, you will wind up
paying more money in interest over the length of the
loan. However, refinancing will make sense if it will
help you eliminate falling behind on your bills.
When does refinancing not make sense?
Refinancing your car loan is not always the best
option. For example, if you have a new car loan,
refinancing will turn your loan into a used loan.
Also, if your car is in very poor condition, refinancing
makes no sense. Why? The interest rate of a depreciated
car is going to be higher than a car that is in good
condition. So, if your car's condition has declined since
you first took out your loan, you will receive higher
interest rates when you refinance.
If you have any questions about refinancing, please