Making Lower Payments With Auto Refinance Loans
Most people are familiar with the concept of refinancing a home loan
, but few seem to realize that the same thing can be done with an auto loan. The reasons for auto refinance loans are the same as with mortgage refinance loans, to save yourself some money on the monthly payments.You can save since in many cases the interest rates will be lower now than when you originally purchased your car. A few percentage points on the interest can save you thousands of dollars a year on your payments, not to mention make those monthly payments a little easier to deal with.
This can be a great option for someone who had some credit challenges when they got their original car loan but have made all their payments on time and have improved their credit score over time. The high interest payments you were forced to pay before just to get the loan can now be lowered considerably since your credit has improved since them (in part because of you making your auto loan payments on time).
That exact scenario happened to me several years ago. My credit had taken a hit due to some personal situations, but I desperately needed a reliable car to get me to and from work. I finally was able to get a car loan for a great, low mileage used car, but my interest rate was over 25%! After just 6 months of making my car payments on time I was able to qualify for a much better loan rate. That one thing saved me a ton of money not only on my monthly payments but over the course of a year as well.
To get a refinance loan on your car, you will have to go through the same steps you would for a mortgage refinance or when you first got your car loan. You will have to fill out a loan application. The bank or credit union will do a credit check and verify your employment status.
Once that process is complete and your loan is approved (hopefully) your new loan will pay off your old loan and your new loan payments will begin. One word of caution though, it may be tempting to extend the term of your loan. Your bank may allow you to do so depending on the value of the car that you are financing. Think long and hard about this option before you sign on the dotted line. It may be tempting to extend the term of the loan so you have a lower payment, but in the long run you'll be paying more in interest. If you can afford it, it may be better to just get the loan paid off as quickly as possible.
If your circumstances have changed for the better since you first got your car loan it may make sense for you to consider auto refinance loans. You might be able to save yourself a bundle in interest rates. If you've worked for a few years to improve your credit score that is exactly what you've worked so hard for, take advantage of your hard work!
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