Auto Loan Refinance

Tag:AutoLoanRefinance | Auto Loan Refinance | Auto Refinance Loan

Auto refinancing can be

applied for online and the privacy and security of your own home.  Many online lenders specialize in good credit, bad credit, and poor credit situations and can help out almost any Auto purchaser.  Auto refinancing is popular with many people that have suffered from bad or poor credit in the past.  These people may have bought a car while the credit was very poor and accepted finance terms that were not in their favor.  However in recent years they have pulled their credit report up to a better number and now qualify for much more favorable terms.  These consumers often find that they are qualified for auto refinance options that are much more attractive than what they were originally offered.  Other people, who commonly used auto refinancing are those that put the emotional part of then auto purchase in front of the financing portion.  These are people that simply got wrapped up in the car of their dreams and were possibly taken advantage of by a salesperson that recognize this.  When the excitement of the new car wore off, they were left with an auto loan that was not favorable to their situation.

Is it possible to refinance a car loan? Is it a good thing to do?
 
Refinancing an auto loan is often a good way to reduce monthly expenses. However, many car owners don't consider the possibility.

How it works
An auto refinance loan is no different than any other used-car loan. You determine the payoff balance on your old new-car loan, arrange for a new used-car loan, pay off the old loan, and begin your new loan. You might be able to arrange the whole transaction with your existing lender. Ask about any possible early-payoff penalties. Also check with your DMV office and insurance company for any required paperwork changes.

Analyze your situation first
First make sure your expectations are realistic. If your current car loan payments are $500 a month, it simply isn't possible to reduce them to $200 a month - at least not in a practical sense. Your payment reduction potential will be much more modest. Let's take a look at an example.

Example
Following is a simple example of an actual calculation in which it is assumed the buyer decides to refinance after one year:

    * New-car loan - $30,000, 6% interest, 48 months. Payment amount - $704.55.
    * Balance owed after one year - $22,570.
    * Refinance loan - $22,570, 7% interest, 48 months. Payment amount - $540.47

This shows a monthly payment reduction of $164 but notice that we've extended the payment term out another year. Had we not extended the loan term, the payment would have been $697, a difference of only $7. Also notice the interest rate on the used-car refinance loan is higher (because used-car rates are higher than new-car rates), which increases the payment amount.

Conclusion
The only practical way to make auto loan refinancing work is to lengthen the loan term — unless there is a significant difference in your old loan interest rate and the rate now available. Since interest rates have stayed fairly steady - actually rising some - this isn't a good basis for refinancing. It's not the same effect as with a 30-year home loan that may have started some years ago when rates were much higher than now.

Relate:Auto Loan Refinance | Bad Credit Refinance | Home Mortgage Refinance | Mortgage Refinancing | Refinance Rate
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