One reason to refinance an Oakville auto loan is to free up cash for something else. They are often referred to as cash-out loans as you’re freeing up cash to take out for something else. But are they a good idea? Do they make good financial sense?
Let’s find out!
Car loan refinancing is something our Oakville auto loan team handles every day. People refinance loans for all kinds of reasons, to lower payments, to take advantage of lower interest rates, to switch from a bad credit car loan to a standard loan and to release money for something else.
It’s that latter we’re dealing with today.
Refinance an Oakville auto loan
Refinancing a loan just means taking out a new loan to pay off the old one. For all those reasons above, refinancing is a common undertaking that can save money or make life easier.
For example, let’s say you have a car worth $18,000 and you have $10,000 outstanding on your current loan. You could in theory borrow up to the value of your car, use the $10k to pay off the old loan and use the $8k for something else.
We wouldn’t recommend using up all your vehicle’s equity but you get the idea.
If you need money for an emergency, have other expenses and no way to raise funds, this can work as a way to raise money.
Paying off other debts
We sometimes recommend refinancing an auto loan in this way to pay off other debts. This is called consolidation. It just means rolling numerous debts into a single loan to keep things tidy and more manageable.
Debt consolidation can save a lot of money in interest so can be a very useful tool in some circumstances.
Refinancing an auto loan to free up cash can be a viable way to raise money but it isn’t without its costs.
The cost of refinancing
You’re going to be paying interest on that higher Oakville auto loan and the monthly payments may be higher than your old loan payments.
If you went for a longer term, you’ll be paying more interest over the term, so you have to think about whether refinancing is a good idea or not before you pull the trigger.
If you’re juggling credit cards, store cards, personal loans or other debt, refinancing an auto loan could be a simple, no-nonsense way to pay everyone off while keeping a single payment.
In the majority of circumstances, an auto loan is much cheaper than credit card interest so you can save money.
It’s difficult to tell in a blog post whether Oakville auto loan refinancing is a good idea or not. In many cases it can be, in some it isn’t. Contact our team to discuss your personal circumstances and we can be much more helpful!
For those of you who know that you have a challenging credit situation, please visit Dixie Auto Loans where we have a team of credit specialists ready to help you get approved for a car loan today!