Refinancing a car loan means switching from one lender to another by taking out a new contract with different repayment options. This can generally be done within the first couple of years after taking out a new loan. The main advantage of car loan refinancing is that you can access lower interest rates and cheaper monthly repayments to save you money in the long term. Here are some important things to consider if you want to refinance your auto loan:
Consider different options
Before you start looking for a new car loan, investigate the market, compare car loans and review different offers. Once you have decided on a lender, research other lenders to compare interest rates. A simple online search will produce a range of results with both good and not so good deals.
Know just how much you are spending on your existing auto loan
In order to see exactly how much you can save with car loan refinancing, make sure your current auto financing contract is up to date and comes with a breakdown of all fees and charges. This will help you assess the savings that could be made from refinancing.
Understand your credit rating
If you have a good or excellent credit score, you may want to refinance your auto loan in order to get a lower interest rate. However, if your history of managing debt is less than perfect, it is best not to make any major changes to your debts, especially in the early stages of your credit history. If you have had a bankruptcy and need to get a car loan refinancing, you will probably find it difficult to obtain an affordable refinance deal.
Find out if there is a fee for refinancing your auto loan
While refinancing fees are not always clearly displayed on offer pages, they most commonly appear in the fine print, often accompanied by a higher APR than advertised. These fees can add up to several thousands of dollars and you should avoid refinancing if they make your new loan much more expensive than your last one. If the advertised APR is lower though, it might be worth reading through the small print to find out what hidden fees you could end up paying.
You may be able to save a significant amount of money by refinancing your car loan with another lender. It can take some time and research to find a good deal, but once you’ve found one it could help make all the difference when it comes to saving money!