Due to the fact that interest rates drop, many people start thinking about refinancing their home loans. But what about doing the same thing with a car loan? In fact, it will be easier to refinance a used car loan and you will save a significant amount of money.
How much you ask? Imagine the following scenario. You purchased a car about six months ago and the dealer said that there are some issues with your credit and your car loan would be 11% on a 5-year loan for a car that’s worth $23,000, which means that your monthly payments are $500. Now, you are searching all over the Internet to find a company where you will be able to refinance this loan. If you do your homework right, you could refinance the balance of the loan and lower your monthly payments to approximately $400 which over the life of the loan means almost $6,000.
If you want to refinance your car loan, you should opt for one of the followings websites: Bankrate.com, Up2Drive or CapitalOne. The first one refinances vehicles on a “referral” basis by taking the loan applications and then matching them with banks.
This online car refinancing will allow you to head down to a dealership as a cash buyer, which means that you will have more protection or better said, be less vulnerable to the salespeople who only what to obtain the maximum profit by confusing clients with monthly payments and interest rates.
If you don’t know if refinancing your used car loan is for you, here are the situations which are suitable for such a decision:
You are the lessor.
You are the budgeter. The client acquired the vehicle on a short-term loan, agreeing to make the high yet affordable payments. Later on, his financial situation changes and the monthly expenses rise. In this case, it would be a wise idea to spread the payments over a more comfortable amount of time. How? By refinancing the car loan.
You are the saver. In this situation, the buyer is always attentive at the Federal Reserve and whenever the interest rates go down, he starts looking for a method to improve his financial situation. In addition, if he’s credit score has improved, he might want to consider refinancing as to become eligible for lower rates.
You are the newly educated remorseful. Imagine this. You have acquired a brand new car and financed it via the dealership. After that, one of your friends asks you about what interest rate they gave you. You then grab the contract and read it carefully, finding out that the dealer made some serious money by marking up the interest rate. Now, you probably want to find a solution to refinance your loan.
If refinancing a used car loan has so many advantages, you are probably wondering why people don’t do it as often as they should. The answer for this question is somewhat unclear; maybe they are concerned about the uncomfortable process that they had to go through when they refinanced the loan for their house. Of course, other people are simply not aware of this possibility.
All in all, keep in mind at all times that whenever the federal interest rate drops, so will the auto loan rates. We’re sure that you don’t want to lose money by paying more interest than you should.