 Auto Loan Refinancing: When To Refinance?
Posted by carsandtrucks on Monday, December 17 @ 07:58:02 PST
Auto refinancing has become more popular because of the current downward trend in interest rates. There are some restrictions that apply to refinancing a car loan. Most commonly is that the majority of the lenders will not refinance your loan if the total amount owed on your vehicle is less then $7500.00, and your credit score must meet a qualifying level. Persons that should consider refinancing are borrowers that a. financed through the dealer, or b. have improved their credit score considerably since the secured the original loan. If your original loan is through the dealer you are probably
paying a higher interest rate. This is because the dealer “bought” your money from a lender. This lender may have been a local bank, or the financing arm of the manufacturer. The dealership bought the money at a certain interest rate, bumped it up a couple of points and sold it to you. Auto financing is a profit center for the dealership. So if you financed at the dealership you should look into refinancing your loan directly through a local lending institution. If you had less then stellar credit when you took out your auto loan, you are currently paying a higher interest rate. If you have made strides in improving your credit score then you can save money by refinancing. Refinancing rates are averaging around 7% at this time. If your rate is 2 or more points higher, then that refinancing option deserves a look. When refinancing, keep in mind your goal is to save money. Do not refinance if the term of the new loan is extended so far out that you end up paying more over the period of the loan. Be sure you factor in all the cost associated with refinancing to be sure that the lower rate is in fact saving you money. Lenders do have fees associated with refinanced loans. If you do refinance, you will need to go to another lender as most lenders will not refinance their own loans. A loan of 16,000 for 60 months @ 9.9% will cost you 339.17 per month. The same loan at 7% will cost you 326.72 per month. This is a 747.00 savings over the period of the loan. Just imagine the savings if your current interest rate is in double digits. Don’t ignore what is going on with interest rates, it can mean found money to you.
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