If you have a car or truck loan, you might be considering refinancing. Before you move ahead, there are some things you may first wish to consider.
What Is Refinancing?
When you take out a car or truck loan, the company that receives your payments is the owner of the loan. Lenders compete all the time and offer different rates to gain new customers. You can decide to refinance at nearly any time during the life of your loan.
Many people mistakenly think that they can’t change the loan that they took out when they purchased the vehicle, but when you refinance, the ownership of your vehicle loan changes hands. In some cases, this can result in lower monthly payments.
It’s All About Interest Rates
The most important thing to consider is whether or not interest rates have changed since you took out your vehicle loan. If rates have gone down, then it is probably a good idea to refinance, even if rates have fallen only by 1%.
Our auto loan calculator can help you quickly determine how much you could save by refinancing.
Credit Score Issues
If your vehicle loan was acquired when you had bad credit, and your credit score has since improved, you should seriously consider refinancing. Some car loans for people with damaged credit carry very high interest rates, so it pays to try to get a new lower rate.
Make sure you compare rates from at least three or four lenders. Some web refinance sites have access to many different lenders, and this can help you find the best quote. CARCHEX offers this service and provides access to nearly 100 lenders.
Lower Monthly Payment Vs. Lower Total Loan
If you find a lower interest rate, you’ll have a couple of options to choose from. One option is to pay less each month, and keep your overall loan term the same. If you decide to maintain the same monthly payment, you’ll reduce your overall loan amount, pay off your loan faster and will pay less interest.
If you are tight on cash, another option is to extend the length of your loan – even if the interest rate remains the same. This may beneficial for someone who is struggling financially and needs to trim monthly payments. Remember, your overall loan size will increase in this case due to accumulated interest.
If you are coming to the end of a lease term, you might also think about financing. Your loan would be much lower that it would be if you were to buy a new car. This might be a good opportunity to move towards owning your car.
Loan Refinancing Fees
Typically the fees associated with car or truck loan refinancing are small. You should expect to pay a $5 – $10 lien-holder fee, as well as a state registration fees which can range from $5 – $75.
Thinking About Refinancing?
Car or truck loan refinancing makes the most sense when interest rates are low. When you refinance, you can reduce your monthly payment or overall loan burden. Apply for refinancing now and find out how much you can save each month on your auto loan.
About The Author
Joe Campanella is the EVP of Business Development for CARCHEX and oversees partner relationships. Joe possesses 12+ years of experience building sales/customer service teams and securing strategic partnerships. He is a sports enthusiast who enjoys mountain biking, surfing and snowboarding in his spare time.