Auto Refinancing Options

This relatively new type of loan offer allows you to refinance an expensive auto loan. Our loan experts explain how this process works and how you can use it to save hundreds or even thousands dollars on your car.

How it works – The auto refinancing process is fairly similar to the mortgage refinance process. Basically, you obtain a new loan at a lower rate to replace your first loan. A few years ago, auto refinancing was pretty rare. Now that interest rates have dropped dramatically, auto refinancing has become increasingly popular. If you decide that you want to refinance your loan, look online and with your local credit unions to see what rates you could obtain. Apply for a no obligation auto refinance quote online to see what rates are available today.

How much can you save – Refinancing can save you a lot of money, if you play your cards right. For example, if you currently have an auto loan for $23,000 at 11% APR for 5 years, you’ll pay $500 a month. If you can refinance this loan payment to $400 a month, you can save $6,000 over the life of the loan! The higher your current loan rates are, the more you can save by refinancing. Most lenders offer refinancing rates around 6-7% APR. This is higher than the auto loan rates you can receive for a purchase loan (as low as 3-4% APR) but is much lower than rates offered by dealerships or granted to borrowers with poor credit.

Who should refinance – Car buyers who have an expensive auto loan or who want to reduce their monthly payments should consider refinancing. Consumers with expensive loans from a car dealer can save big by refinancing with a lower rate from an independent lender. Refinancing can also be helpful for people who want to buy the car they are currently leasing. If your credit scores have improved significantly since your original car purchase, you may also be able to reduce your rates by refinancing your auto loan.

What are the requirements – Not all auto loans will qualify for refinancing. Most lenders require you to have at least $7,500 due on your current loan in order to refinance. There are also common restrictions on the age of the car and the car’s mileage. Plus, you may need to have a credit score above a certain level to qualify for a good refinance rate.

What are the dangers – While auto refinancing can help you save a lot of money in some situations, it may not always be a good decision. If you are thinking about refinancing, be sure to include all the fees and costs in your savings calculations. The fees required for your new loan could outweigh your savings. Be aware that a refinance may extend the term of your loan in order to reduce your monthly payments. This could result in increased costs over the life of your loan.

Refinancing allows borrowers more flexibility and freedom with their auto loans. People with expensive auto loans are no longer stuck with them for the life of the loan. Use this new system to your advantage! Find out today if refinancing your auto loan can help you save money
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