Refinance a Car Loan: Things To Know

If you need to consolidate debt or free up some extra money each month, you need to know how to refinance a car loan. Essentially, this process involves the trading in of one loan for another, usually for a more favorable interest rate. By doing this you will lower the monthly payment you make on your car loan and you will save money in the long run in interest charges. There are some things to know about car refinance that will help you make a more informed decision about this valuable service. It may or may not be for you, but you owe it to yourself regardless. Keep in mind:

Car refinance can work for either new or used cars, but if the car is used, it has to be less than five years old. Other conditions that may apply have to do with your current loan. You have to owe at least $7,500 and not be upside down on the loan. Being upside down means you owe more on the car than it is worth. There may also be mileage limitations on the car to be eligible for refinancing.

Auto loans become troublesome because of high interest rates. When you first purchased your car, you may have received a high interest rate, perhaps because you were a first time buyer or because your credit rating was not very good. This high interest rate translates into a high monthly payment, and that increases the amount of interest you will pay over the life of the loan. By refinancing, you pay off the first loan with a second loan that has a lower interest rate, sometimes drastically lower. Not only does this reduce your monthly payment, but it can save you hundreds if not thousands of dollars over the long haul.

When you are wondering how to refinance, reading this already puts you half way there. Search for car refinance online and you will find any number of lenders willing to process your car refinance loan application. One of the benefits of applying online is that you receive several quotes from third party refinance specialists. Unlike banks or credit unions who give you their quote only, a third party lender will offer several to choose from, giving you the ability to pick the best one for your situation. In addition, there are no obligations to continue once you receive these quotes. If you decide the time is not right, you do not have to commit.

There are several things to know when you refinance a car loan. It can be a confusing process mainly because of the many unfamiliar terms. It behooves you, however, to familiarize yourself with them and to carefully read through every term and condition that comes with your refinance package so you are not taken by surprise. If you do that, you will find that car refinance has much to offer by way of savings, both monthly and long term. You can consolidate debt by taking out a refinance loan with a lower interest rate. Even if your credit rating is not the best, car refinance is still within your reach. In fact, it may even help to improve your credit, saving you money at the same time.