When interest rates begin to drop, there is always talk about refinancing your home but many fail to think about their car. With the price of cars today, it is not unlikely to have tens of thousands of dollars in auto loans, especially if you are currently paying on two vehicles. It is always a smart idea to investigate whether auto refinancing is a great deal for you. In many cases, it can save you money either monthly, over the life of the loan or both.
Your credit may be better today
If you only qualified for a high interest rate loan because of blemishes on your credit report, it could be to your benefit to check into auto refinancing. Generally, your credit score will improve after six to twelve months of consecutive on-time payments. If this is the case for you, you could refinance with a lower interest rate. Not only will this lower your monthly payment, it will also reduce the amount of interest you will pay over the life of the loan.
You can save money each month
Through auto refinancing, you can lower your monthly car payment thereby saving you money each month. Unlike house refinancing that can cost you thousands in closing costs, auto refinancing generally has no costs except for a minimal state mandated title transfer fee. When you've financed thousands of dollars as you most likely have with your car, even a small difference in interest rates can mean a big difference in the total amount paid. Let's look at the difference your interest rate can make on your monthly payments and the overall cost of the loan.
| ||60 mths, 6% ||60 mths, 9.5% |
|Loan amount ||$25,000 ||$25,000 |
|Payment ||$483 ||$525 |
|Interest paid ||$3,999 ||$6,502 |
As you can see in this scenario, refinancing can save you nearly $50 per month, as well as saving you more than $2,500 in interest paid.
Interest rates are at the lowest they have been in years
Auto refinancing rates are at their lowest. Even if it has only been two years since you bought your car, there could be a big difference in interest rates. This difference in interest rates can mean a big difference in what is in your pocket at the end of the month. Be sure to take advantage of these low rates.
You can lower your payment by extending the term
If you financed your vehicle for a short term, you can refinance for a longer term and lower your payment. Coupled with lower interest rates, this can mean a great deal of savings for you if you look into car refinancing now. Many times, a shorter payoff time looks great in the beginning but as you begin to make those high monthly payments, you wish you had just decided on traditional financing terms. Auto refinancing gives you the chance to lower your payments.
| ||36 mths ||60 mths |
|Loan amount ||$25,000 ||$25,000 |
|Payment ||$760 ||$483 |
As you can see in the example above, extending the term of your loan through car refinancing can have a tremendous impact on your car payment.
It's easy and quick!
Auto refinancing is one of the easiest and quickest loans you can obtain. The fees associated with auto refinancing loans are also very low. One of the easiest ways to refinance your car is through an online lender. These lenders offer online applications that take less than five minutes to fill out. This means you can be approved for your auto refinancing loan in a matter of minutes. Credit unions are another source that may have low rates available.
It is always smart to investigate ways to save money. Auto refinancing is one of the best ways to do this. Whether you decide to refinance for the lower interest rate, to extend the term, or both, refinancing can be a great deal for you and your bank account.