Your car loan is about to expire and you are wondering if should you refinance it?
Maybe you are paying an above-average rate on the loan possibly because your credit was not so great when you first financed the car or you simply signed on for a bad deal.
Well, now may be the perfect time to refinance it and move forward.
As with the interest rates for new cars, you may be able to find refinancing rates that are much better than the original. It never hurts to start looking to see if something better is available to you.
Unlike refinancing a mortgage, refinancing an auto loan involves no closing costs, or appraisal fees.
With current interest at a low rate, this is truly a time to refinance your auto loan indeed – in some instances it could be as low as 3 percent or less.
What Will Might You Save?
The refinancing rate you can obtain depends on a variety of factors, including what your credit score is, how old your car is and how long you are refinancing for.
You could also reduce the monthly payment by extending the refinancing period beyond the remaining months you have left. But that would eat up some or even all of the total savings. And it can leave you having to make payments on an aging car that could require expensive repairs at some point.
That’s why you should consider extending your existing loan only as a last resort, perhaps to avoid missing loan payments, which can affect your credit score or even lead your lender to repossess your car. And why risk those things, right?
Follow these tips if you think you might benefit from refinancing your car loan:
- Ask your bank for a rate reduction. Your existing lender might lower the rate on your current loan if you stay firm on what you want. For the most part, lenders often won’t finance loans you initially got from them, but never say never.
- Compare rates. Consumer Reports found a wide range of refinancing rates on various lender websites, from 2.24 percent to as much as 4.63 percent. However, keep in mind advertised rates typically apply only to customers who have excellent credit. If you’re behind on your current loan, your rates would probably be higher, or your finance application might not be approved.
- Check the fine print. Not all car loans qualify for refinancing.
- Look for prepayment penalties. Although the practice is rare, some lenders charge a prepayment penalty if you pay off your current loan early, which can reduce your savings if you do decide to refinance the car.
- Find out whether refinancing is worth it. F figure out how much you might save by refinancing. If you’re already paying a low interest rate on your loan, less than 5 percent or even lower, you probably won’t benefit much, if at all.
Bottom-line: Don’t put it off. The sooner you decide if you want to refinance your car, the more you may save on the cost of the loan.