If you are thinking about refinancing your auto loan, there are several factors to consider. As with any financial decision, it is important to be fully informed first.
What is a car refinance loan?A car refinance loan pays off an existing auto loan with a new loan. It’s really quite simple: Your current auto loan and title are transferred to your new lender. You then simply make your car payments to the new lender.
When should you get a car refinance loan?Ask yourself the following questions as part of the decision-making process:
- Did you get your auto loan from the dealership? Although you may have gotten a great deal on the car, you probably didn’t get the best deal on the financing if you used the dealership. If your car is dealer-financed, that might be the first sign that car refinance is right for you.
- Do you have an upside-down loan? An upside-down loan means that you owe more for your auto loan than the car is worth. Car refinance may be able to correct this situation. No one wants to trade-in or sell a vehicle and find out that the money given for the car won’t even cover the balance on the auto loan.
- Is your interest rate high? Your interest rate may be higher than it should be, especially if you originally got your auto loan through a dealership. Also, rates may have fallen since you first got your loan. Using car refinance to get a lower rate is usually a good idea.
- Is your monthly payment too high? If you get a lower interest rate through car refinance, your monthly payments should fall, too. However, avoid the mistake of stretching out the term of your auto loan. Although it may yield lower monthly payments, that is also the surest way to end up with an upside-down loan.
If all or even most of the above questions apply to you, then you may be a good candidate for car refinance.
If you have decided that car refinance is for you, then you must look into your options. A good place to start is at LendingTree where you can compare auto refinance offers from up to four different lenders. That way, you can find a rate that you like and get a better auto loan through car refinance.