If you’re in hot waters financially and aren’t able to figure out the source sucking up all your money recently, you may have been looking in the wrong places. A bad auto loan eats up your savings in the most unobvious of ways at times.
However, is there a way to bring some big money back into your life? Fortunately, yes. All it takes is a good auto refinance deal to get your finances back on track. While not many people think of it as the absolute money-saving hack, some have greatly benefitted from it.
Here’s how auto loan refinance can help you save up hundreds of dollars.
Does an Auto Refinance Help You Save Money?
While the idea is to consider it as a possible way out of a bad loan, you must not put all your eggs in one basket. Refinancing an auto loan is only one way out.
According to a TransUnion study that looked into refinanced car loans of about 1.5 million dollars in worth, consumers ended up saving around $52 a month. At the same time, consumers also reduced the interest rate by 2.4% on average. If this isn’t proof enough of how effective an auto loan refinance can be, then nothing else can be.
Lay the Ground Work for Yourself
Increasing your savings by auto refinancing isn’t something you can achieve overnight. You must be mindful of the following factors and lay your groundwork before expecting an auto loan refinance to turn your situation around:
- Stay up to date on your car payments as it’s one of the best ways to have good credit and land better terms with a new lender.
- Never owe more on your vehicle than its worth, as it can cause you to be upside down on your loan. While it won’t eliminate your chances of applying for a refinance, you may end up reaping no benefits from it.
- Shop around and look for the right lender. Remember, your goal is to land a better deal and not to settle for anything that comes next.
What Costs Are Associated with an Auto Refinance?
Usually, there are no charges to apply for a car refinance, but completing the process may require you to pay title and state fees. However, be wary of any prepayment penalties in your loan terms, as they may backfire when it comes to saving up.
Does Your Car’s Condition Matter?
At this point, it shouldn’t come as a surprise, but most lenders are very particular about a car’s make, model, and mileage when considering your refinancing application. Hence, if your vehicle is too old, it may not qualify for refinancing with most lenders.
The Bottom Line
In the end, an auto refinance may be a great way to get back on track financially, but it may not always be right for you. In fact, not weighing the pros and cons carefully may only cause your situation to get worse.