Auto Refinancing: A Simple Solution To High Auto Loan Payments
Are you in over your head because of your monthly car payment? We’ll show you why auto refinancing might be the solution.
Consumers tend to shy aways from “refis” because of the fees and the stacks of paperwork they imagine. In fact, auto refinancing is a much simpler and cheaper process than many would know. There is no appraisal process to go through with a car, as values are already marked in price guides like Kelley Blue Book. Instead, auto refinancing typically involves a brief application and a nominal lien filing fee, which varies from state to state but typically is no more than $65.
Now that you know how easy and cheap refinancing can be, how do you know if it’s right for you? If you’re in one of the following scenarios, then you should consider getting an auto refinancing quote:
- Buyer’s Remorse. You didn’t shop around for financing and got slapped with a high interest rate. Refinancing can lower this rate and save you money.
- Improved Credit. Your credit score was less than stellar when you bought the car, but has since improved. Refinancing can lower your interest payments.
- Budget Crunch. You bought a house, or maybe you were laid off, and your budget’s tight now. Refinancing can help you stretch out the loan, even reduce the interest rate. However, unless you’re unable to afford your current monthly payment, you should never agree to a longer loan period. Sure, you might get a lower interest rate, but any savings will likely be cancelled out by the increased term.
There are also times when refinancing is ill-advised or pointless. For instance:
- Unchanged Credit. Unless overall interest rates have dropped significantly, you’ll get about the same, or even a higher rate.
- Damaged Credit. If your credit has actually worsened since you got the original loan, refinancing might actually raise your rate.
- End of Loan Period. If your auto loan has a year or less left on it, you’re probably not going to pay much interest for the remainder of the period. Refinancing won’t make a big difference.
There’s another catch: If you’re upside-down on your loan, which means you owe more on the car than it is currently worth, lenders might not be willing to refinance you. That’s because to refinance, the lender will use the car as collateral on the new loan. If this is the case, and you’re suffering from a shrinking budget, the best thing to do is to discuss the situation with your lender and try to have your existing loan extended.
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