Tips on refinancing your car

Do you need to refinance your car? Is it time to save more money or change your terms?

Check out some tips on refinancing your car.

For many of you who have recently purchased a car, it is unlikely you have paid in full for your comfy set of wheels and chances are that you took out a loan. If you are unhappy with your current loan conditions, or would simply like to alter some of the details, you should look into refinancing your car. This can reduce your monthly payments, lower your interest rate, or change the length of your loan to either longer or shorter, depending on your needs.

Of course, you need to be aware that there is much to learn and this article will only cover the basics. If you wish to find out more information, look online for more details.

Well, to start with, many of you might ask: “What is car refinancing?” Simply put, it means you take out a new loan to pay off an existing one, using your car as collateral. This loan is a new contract between you and the lender, with new terms upon which you both agree. These fresh terms, that should better suit your budget, are the main reason people opt to refinance their cars.
New terms include reducing or extending the duration of the loan: lengthen your loan if you believe you need more time for repayments and smaller monthly payments; reduce your loan if you wish to pay off your car sooner. Of course, this means larger monthly payments.

You could also change the amount of the current monthly repayments on the original loan. Refinancing by lowering the interest rate and therefore the repayments is one option, or you could lengthen the loan, or both.

If you choose and qualify for this lower interest loan, you may reduce the total interest paid on completion.

Keep in mind that there is likely to be a transaction fee if you decide to refinance. For those of you who would like to examine the numbers, plenty of online websites offer refinancing calculators that provide you with exact amounts and details.

If you are still undecided, here are some helpful hints to guide you. This process, unlike home or credit refinancing, is relatively quick and easy. No appraisal is necessary, and if there are fees, they are minimal.

The six scenarios outlined below help you decide when you should consider refinancing your car.
1. Look at your current interest rate. If it is over 6 per cent, consider refinancing.
2. Your credit score has improved. This will allow you to have lower interest rates. Check your credit score to see if this applies to you.
3. The current lease on your car is set to expire, and you wish to purchase the vehicle. Fulfilling the terms of a lease usually grants you the option to buy.
4. A drop in interest rates. If rates have dropped since you bought your car, you could save money. Even a drop of 1 per cent could save you a lot of cash over the course of the loan.
5. Your financial situation has taken a turn for the worse. In the event of a financial emergency in which you find yourself struggling to make the repayments you had budgeted for, refinancing can ease this problem by lowering your monthly costs.
6. You currently have a bad rate of interest on your loan. Even a solid credit rating when you purchased the vehicle does not mean you will have a good interest rate on the loan. Many customers are unaware of this fact. Look into this in more detail if you believe it applies to you.

If you decide to refinance your vehicle, shop around first for one that will ultimately work for you. Don’t jump for the first option you find.

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