Refinancing an auto loan is just a fancy way of saying you’re taking out a new loan to pay off the old one. The financial industry likes these kinds of terms because it sounds official, but there are no mysteries here. Our London auto loan team has been working on a few refinancing deals this week so they thought it might make the benefits of car loan refinancing a useful topic.
Benefits Of Car Loan Refinancing In London, Ontario
As we said at the top, auto loan refinancing just means taking out a new loan to pay off the old one. It may not sound that useful on the surface but once you consider all the different situations people find themselves in, it quickly becomes more interesting.
Here are four benefits of car loan refinancing in London.
Lower your monthly payments
If you’re a year or more into your current auto loan, you could refinance to lower your monthly payments. You can use what you have paid and the current value of the car to reduce the next loan amount, and the monthly payment.
You’ll need to check you’re not in negative equity and actually have positive equity in the car otherwise it might not be worth it.
Lower the interest rate
If your car was bought with a bad credit car loan in London and you have subsequently improved your credit score, you may now qualify for a cheaper loan. Improving your credit score even slightly can take you over the threshold between bad credit and fair or good.
If the differences in interest rates is enough to make refinancing worthwhile, it could save you a lot of money per month and over the loan term.
Consolidate your debt
If you have equity in your car, you could refinance the auto loan to pay off other debts.
For example, if you have credit cards, personal loans or other debt, you could borrow up to the current value of the car to free up cash and pay everything off with that cash. That way, you only have a single outgoing per month and will be almost debt free.
Remove a cosigner or co-borrower
If you used a cosigner or co-borrower to get the loan and your situation has improved (or worsened with the co-borrower), you could refinance the loan to remove them.
This is rare but is a viable way to take control of the loan and the car. We see this mainly with divorce or with young borrowers. A parent comes in on the loan to help their child. Once the child knows they can afford repayments and has built sufficient credit score to qualify, they like to go it alone.
Auto loan refinancing
Refinancing an auto loan in London is purely optional and won’t be suitable for everyone. If it does work in your situation, it can offer some genuine benefits as you see here.
If you think you might benefit from auto loan refinancing, contact one of our team who can discuss your options.
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!
For any questions or concerns, please don’t hesitate to contact us here!