Refinancing your auto loan isn’t something to be done lightly. But done right, it can save you money, lower payments and put you in a much better financial position. It doesn’t work for everyone in every situation though. So, what are the 3 main reasons for car loan refinancing?
We asked our Vineland auto loans team to outline the three main reasons for car loan refinancing. This is what they said.
Refinancing an auto loan in Vineland
While everyone is different, there are three main reasons someone might want to refinance a loan. Those reasons are:
- To lower monthly payments
- Take advantage of lower interest rates
- Consolidate debt
These aren’t the only reasons for car loan refinancing of course, just the main ones we come across most often.
Lower monthly payments
Refinancing to lower monthly loan payments is probably the most common reason we see.
You can extend the term, so your loan is stretched out longer, reducing the amount you pay each month. This does end up more expensive overall, but does have cheaper monthly payments.
You can lower the amount of the loan. If you have paid off the car for a couple of years and have equity, you can refinance to that lower amount, which will also give you lower monthly payments.
Take advantage of lower interest rates
Another common reason to refinance an auto loan is to get a lower rate.
If headline interest rates have lowered since you got the loan, lenders should also be offering lower rates. If that rate drop is enough to make it worth refinancing, it can save you money over the term.
If you originally got a bad credit car loan in Vineland and have improved your credit score enough to qualify for a standard loan, that’s a significant interest saving you could make.
Refinancing can make sense if there is a significant rate drop but not so much if the drop is more modest. Being able to qualify for a standard loan over a bad credit car loan is probably the best example of saving through interest.
Consolidating all debt into a single loan is also a common reason why car loans are refinanced.
If you have equity in your car and a good credit score, you can actually borrow more against the car if you need to. As long as there is sufficient equity and your score is good, you should qualify.
The idea is to borrow against your car to pay off all other debt. While the car loan would then be more expensive each month, it should now be your only debt payment rather than one of many.
Plus, auto loan rates are lower than payday loans, credit cards and many personal loans.
If you need to refinance your auto loan in Vineland, contact the experts. We can help.
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!