Refinancing Your Auto Loan

When you own a home, it’s a foregone conclusion that at some point you may consider refinancing your home. Refinancing gets you a better interest rate and Refinancing a carlowers your monthly payments. For some reason, however, few people consider refinancing their auto loans, which can have the same effect.

The Refinance Process

Refinancing a car is even easier than refinancing a home. The procedure for doing so is not much different—you take out a new loan, usually from a different lender, to pay off the principal on your existing one, and pay on the new loan, which preferably has a better interest rate.

The application process for an auto loan refinance is quick and easy, relatively speaking, so it never hurts to give it a go. Sometimes it can even be done at home on your computer. Even a small adjustment to your interest rate can make a big difference in your monthly payments and loan term.

Who Should Refinance?

If you are stuck with a high interest rate, you should consider refinancing. This approach can be especially good for those with credit problems due to bad or no credit, those who are recently unemployed, and those who are currently in a variable interest rate situation.

If you have more debt than when you purchased your vehicle and lower monthly payments would help, or if prime rates are much lower than when you first bought the vehicle, refinancing can help.

If your current loan is in good standing—you haven’t missed any payments—it doesn’t hurt to take a go at refinancing your auto loan.

Things to Beware

Look over your original loan terms before engaging in a refinance offer. Some loans carry fees for paying the loan off early, and there is almost always a fee for changing the title from one lender to another.

Remember, your lender has a lien against your vehicle, meaning they own it until you pay it off. The title will need to be transferred to the new lien holder. These fees, however, usually only amount to a few hundred dollars at most and your new lender may be able to help out with the costs.

If you are considering refinancing your auto loan, check out some of the lenders you may have looked at the first time around. Look at your local bank or credit unions, or specialty car loan dealers. Shop around for the best rates, and go for it—all you have to lose is hundreds to thousands of dollars in monthly payments!

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