If you are looking to get a better deal on your auto loan, secure lower monthly payments, or get a lower interest rate on your auto loan, you can refinance your car loan. There are many benefits of refinancing your car loan, including a shorter loan term, reduced interest rate, and smaller monthly payments.
Read on to find out more about the benefits of refinancing your auto loan and what they mean,
Refinance Your Car Loan
1. To Secure Lower Interest Rate
If your credit score was poor when you bought your car and has improved since then, you could qualify for a reduced interest rate. This is especially possible if you are on time with your monthly payments. You can also qualify for a lower interest rate if the market rates have dropped or if you did not get a good rate on your original loan. Even by securing a 1% lower interest rate, you can save a lot over the life of your loan.
2. To Pay Lower Monthly Payments
If you feel like your monthly payments are too high for you to handle, you can get them reduced by extending your loan term. A lower monthly auto payment would free up money to pay off other bills. However, extending your loan term means you will also be paying a higher interest rate over the life of your loan. But you do get temporary relief in terms of smaller monthly payments.
3. To Pay Your Loan Off Earlier
If your financial situation has improved and you have enough money on your hands to pay off your car loan earlier than the agreed time, you can refinance your auto loan to a shorter term and a lower interest rate to pay it off sooner. However, you may have to pay a prepayment penalty if your lender requires it.
4. To Tap On the Equity On Your Car
You can borrow cash using a cash-out refinance loan on your car’s equity if you are in need of cash. For instance, if your car is worth $30,000 and you have $10,000 remaining to pay on your car loan, you can apply for a refinance loan for $15,000 and keep the extra $5,000 in cash for use.
Now that you know how you can refinance your car loan to get all these benefits, go ahead and talk to different lenders to see your options.