Car Loan Refinancing: The Basics
The car loan refinancing process is actually quite simple. Using a new, lower-interest loan from another lender, you pay off your existing car loan. The title of your vehicle is then transferred to the new lender, to whom you now make your monthly payments. Because the new lender will almost always offer a lower interest rate, you can save on monthly payments, the total cost of the loan, and/or the time it takes you to pay off your car.
If you are unsatisfied with your present auto loan for any reason, car loan refinancing might be able to ameliorate your situation. There are several main reasons why car loan refinancing makes sense:
- You can lower your monthly payments
- You might be able to lock in a lower interest rate, or APR, on your loan
- You might be "upside-down" in your car loan, meaning that you owe more on your car than it is worth. Car loan refinancing can change this.
If you financed through your dealership when you bought your car, it is a strong probability that the terms of your loan are not ideal. Car dealerships are notorious for bilking borrowers with less-than-competitive terms on car loans. Thankfully, you are not wedded to the same loan until the day you pay it off. Car loan refinancing helps you improve your loan situation, which ultimately saves you money.
Refinancing Your Car Loan Is Worthwhile
Relatively speaking, the disadvantages of car loan refinancing are negligible. As with any new loan, your credit score will temporarily dip when you refinance your car loan. However, the dip in your score is fleeting and must be weighed against the fact that you will have more money to pay your other debts. Of course, there are also fees associated in car loan refinancing. Such fees might include prepayment fees on your old loan, lien holder fees, and state re-registration fees. With the exception of prepayment fees (which might not even apply to you), these fees will not exceed $75. After a few months of payments, though, your car loan refinancing will have paid for itself and then some because of the savings you will accrue.
Many websites exist where you can compare the terms and rates of various lenders online for car loan refinancing. Such websites are a boon to consumers like you because they allow you to select the most desirable terms with the most competitive rate. To get these side-by-side quotes, you usually need some basic information on your present car loan and a general idea of your ideal rate and terms for your new car loan. If done online, the process is usually surprisingly simple and fast. In fact, under the "Apply Now" section of this website, you can find a free application for car loan refinancing that will allow you to compare rates from various lenders.