How does a car loan refinance work?
Refinancing an auto loan means taking out a new loan to repay your old loan or loans. If you qualify for a loan with better terms and requirements, you could save valuable cash each month.
Alternatively, you may wish to take out a refinance car loan for the same amount but for a shorter period of time, meaning you could get out of debt earlier and save on interest payments. Many car refinance companies offer refinance loans, so it is worth considering if you could profit from refinancing your auto loan.
Why should I consider auto loan refinancing?
There are several reasons that you should consider auto loan refinancing. Even so, you don’t need to meet all of these reasons to apply – you can still take advantage of the benefits that refinancing your car loans can bring, no matter your circumstances.
Better interest rates
If your credit profile has improved (or interest rates generally have improved), you can refinance your loan to take advantage of better interest rates. These superior interest rates mean you may be able to commit to a lower monthly repayment. Therefore, if you are eligible for a lower interest rate on your auto loan than you are currently paying, it can be an instant money saver.
However, ensure that any new refinance car loan that you enter into doesn’t have any hidden fees or costs. Otherwise, you will not be performing a like-for-like comparison and may not save money in the long run.
Lower monthly payments
If you are in a position where you have less disposable income than desired, you could refinance your auto loan to extend the term of the loan. Extending the duration of the loan when you refinance would lower your monthly payments, freeing up more cash for you each month to spend on what you need. Bear in mind that increasing the term of the loan may lead to you paying more interest in the long run.
Entering into a fixed payment loan gives you the certainty of how much money you will need to spend each month. While a variable rate loan can lead to nasty surprises in the case of interest rate rises, a fixed loan gives you peace of mind knowing how much cash you will have to spend each month. We recommend considering a fixed rate if you are looking for an auto loan refinance.
How to calculate the best interest rates for your auto loan refinancing
The easiest way to calculate the best interest rates for your auto loan refinancing is by using the refinance loan calculator on this page. This calculator generates your monthly payments instantly, giving you an immediate idea of how much cash you could save each month by refinancing your car loan. You can also adjust the loan terms to see what effect paying over different periods will have on your monthly payments.
What are the advantages of auto loan refinancing?
While there are specific circumstances that may prevent you from refinancing your auto loan, it can come with tons of advantages for many, including:
- You can pay off your car loan more quickly. If you have had a change in circumstances and you have more disposable income available, you can take advantage of vehicle refinance and pay your car loan off sooner. Doing so reduces the amount of interest payable over the life of the loan and gives you extra peace of mind by getting you out of debt sooner.
- You can get a better interest rate. If you took out a car loan when your credit profile was poor, and you have been on time with your monthly payments since then, your credit profile will likely have improved. An improved credit profile could result in a better interest rate being available to you, which means you can save money each month as your repayments will be lower.
- You can access the equity held in your car. Some auto refinance financial companies give the option to take out a cash loan based on the value of equity held in your vehicle. However, it’s vital to note that cash-out refinancing often comes with less than favorable terms. As such, we wouldn’t recommend this if you have other options available to access cash quickly.
Ultimately, if you have a car loan and your circumstances have changed since taking out the loan, we recommend looking into the benefit of refinancing your auto loan. You can use auto loan refinancing in various ways, and it can be suitable for you if your financial position has either improved or worsened.
While refinancing may not always be beneficial, it is worth considering in many situations. For example, a refinance auto loan may not be the best option if you are near the end of your original loan or you need other types of credit in the short term. Outside of these circumstances, auto loan refinancing could leave you in a better position, so take a look today and see what refinancing could do for you.