An Overview of the Pros and Cons of Refinancing an Auto Loan3 min read
Refinance auto loan? A refinance of a car loan may assist you in lowering your monthly payments while keeping some extra money in your pocket. However, it is not without its risks. So, when refinancing your vehicle, you should weigh the pros and cons. We’ve compiled some tips to help you make an informed decision about car loan refinancing, from what it is to how it may affect your finances.
Cons and pros of auto refinancing
Refinance auto loans and reach your financial goals. Read on to learn about the pros and cons.
Interest rates can be reduced
You may qualify for a lower interest rate if your credit is better now than when you purchased your car. The situation is especially important if you have paid on time for six to twelve months in a row. Additionally, interest rates might be lower in general, or you might have taken a higher rate than you could qualify for to get a better deal on the car itself.
Whether you refinance an auto loan to get the lowest interest rate possible or not, you could potentially save enough interest to make the refinance worthwhile.
Payments can be lowered
Several ways are available for refinancing your car. You could reduce your monthly payments by securing a lower interest rate. You could also extend the term of your loan. By extending the term from 48 to 60 months, you will pay a lower monthly payment. It is vital to know that extending your loan’s term may result in an increased total amount you must pay back. To see how this works, you can use our loan calculator.
Your loan can be paid off sooner
You might consider refinancing your car loan if you’ve seen an increase in your income since purchasing your car. That would allow you to pay it off sooner. Certainly, you can pay extra on your car payment right now; however, refinancing could help direct more of that money to the principal, resulting in even greater savings.
Refinancing fees might apply.
In addition to application and origination fees, auto refinancing may include title transfer fees. There are, however, differences in fees between lenders. Some lenders may not charge any fees at all. Consider all fees associated with refinancing options when comparing offers. By refinancing your car too much, you may end up paying more in the end than if you stay put.
Interest could cost you more.
As a result of the additional months of interest you pay when refinancing to a longer loan term, you may end up paying more in the long run. Reducing the interest rate may not bring back the cost of paying interest for several years.
Have you made up your mind yet?
There are options available to you. Although a refinance may seem appealing, it’s not something you should rush into. The best way to make a confident decision is to do your research and consider both sides of the coin.