Sunday 3 March 2024
  • :
  • :

Benefits of Choosing to Refinance Your Auto Loan

Benefits of Choosing to Refinance Your Auto Loan

Taking out a car loan is one of the only ways most of us can afford a vehicle. Not many of us can waltz into a dealership and hand over cash for the car we both want and need. Car loans are great for paying for those vehicles people have to buy because the lender puts the money out for the purchase upfront and then the individual holding the loan is responsible for paying it back. The only issue that comes with having a car loan is the fact that it might not always be a good fit for your needs. An otherwise decent loan may become too expensive because of life changes, budgeting issues or because you were locked into a variable rate that’s skyrocketed over the course of several months. In this case, refinancing can be a reasonable option for you.

What is Auto Refinancing?

Auto refinancing basically refers to getting rid of an old car loan and getting a new one in your name. It renders the old loan null and void so that you’re only left with one affordable payment each month.

Why You Might Need or Want to Refinance

There are a plethora of reasons to refinance your car loan. One of the most common reasons people refinance is because they want a better APR rate or need to extend the term length of their loan. If your rate was high when you first signed on because of credit score issues that have now been resolved, you can now get a better loan at a more affordable rate. Also, you might want to refinance if you have someone co-signed on your loan who you need to get off. This is especially true in the case of adults who had a parent co-sign their loan when they were younger but now want the loan entirely in their name.

Choosing the New Lender

When refinancing, you’ll need to choose a new lender who offers reasonable rates and specifically works with refinanced car loans. Not every car loan lender will offer refinancing, so this is a specific genre you’re going to need to look for when comparison shopping.

Understanding Your Eligibility

You might want or need to see if you can refinance your car loan, and for the most part, you can refinance at virtually any time. Even if the loan is brand new and has just been taken out months before, refinancing is still a viable option that can work wonders for your budget. If you have a bad credit score, you may not necessarily be eligible for refinancing at all or your rates could be higher.

All About Rates and Terms

The rate you pay on the loan directly impacts your monthly bill and the loan’s affordability. You can choose between a fixed rate that stays the same throughout the entire loan term or a variable rate that can change according to the market. You’ll also need to decide how long you need to pay off the loan. The majority of refinanced loans have a term length of anywhere from three to seven years.