Making The Most Of Your Money

3 Reasons To Consider Refinancing Your Auto Loan

8 September 2022 by Glen Robinson

You may not like the terms of your auto loan, but you got the best deal you could at the time. Perhaps your credit wasn't good, or you had no credit rating at all. Enough time has gone by that your credit rating has improved. There are a few good reasons to consider auto loan refinance. The following are three of the most important.

You want to save money on the total cost of the loan

You may not have any problems making your monthly payment, but when you look at the total cost of the loan, it's more than you're comfortable with. At the time you bought your car, it was the best interest rate you could get. Since then, your credit has improved, substantially. In addition, the car is now worth more than the balance of the loan. Since you can comfortably make your monthly payment, you can refinance with a lower interest rate and substantially fewer payments to pay off the loan. This will result in savings on the total amount spent beyond the original cash price of the car.

You want a lower monthly payment to reduce your monthly budget.

You want a lower monthly payment, and you are willing to extend the length of your loan. This is somewhat different from the example above. In this situation, your credit has improved to the point where you can refinance, but not with a significantly lower interest rate. However, by extending the length of the loan, you can reduce your monthly payment. If you have a tight budget, a lower monthly payment can mean less financial pressure. 

You want lower monthly payments, without necessarily reducing the length of the loan

At the time you got the loan for your new car, you had no credit rating. You ended up with unattractive loan terms, including both a high-interest rate and a lengthy loan period. Now, after a couple of years of making your payments on time, you have a good credit rating. You may be able to refinance with a lower interest rate, and possibly a reduction in the length of the loan. For those who started with no credit rating, at some point, this will usually be a good option.

If you have improved your credit rating in the last couple of years since you borrowed money for your car purchase, you may be able to refinance the loan. There are three good reasons to refinance an auto loan. You may want to decrease the time left on a loan, reduce the monthly payment, or a combination of the two.

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