If you’re hunting for a new car and have a shaky credit history, a high interest Auto Loan might be your only option. Although you may be dismayed by the heavy interest charges, don’t fret, refinancing at a lower interest rate and payment is possible! What many people fail to realize is with 12 months of solid payment history, there is a good chance that the vehicle could be refinanced.
Loan refinancing is nothing new, individuals has been refinancing their mortgages to lower their interest rates and to consolidate debts for a long time. But it is in last few year or so that the option of refinancing an auto loan has been offered. Even though car loans are normally much smaller than mortgages, it can still be a smart choice to save money.
Why you should consider refinancing your Auto Loan
The thousands of dollars that will be saved should be a tremendous incentive for applying for car loan refinancing. There are wide array of reasons why people may get stuck with an auto loan plan which may need astronomical payments and incredibly high interest rates. Lots of people may wish to change the payment plan on their auto loan and wish to make the period of time that the loan is repaid longer or shorter. Auto refinance is perfect for this. In other word you can make a plan that best fits to your life and still leave you financially stable
When to Apply for Auto Refinance
When a person submits a credit application to refinance, the following steps are taken. Firstly the new refinancing company will pay the loan and existing balance to the existing finance company. After that the refinance company will send an invoice to the customer that includes a new, lowered interest rate. With the help of a lower interest rate the customer can sufficiently pay off the loan for the time period that has been agreed upon. Point that should be noted here is that when a person signs up with a refinance company, the interest that may have occurred with the existing company will not have to be paid. This is because of the fact that only the past interest can be accounted for. After this is done the customer does not need to deal with their previous finance company anymore.
How much money can I save?
Below you will find an example of how much money can be saved with car loan refinancing. A person may buy a car as well as get finance with an interest rate of 8.9%. Repayments have been done since then and the person is good financially. Furthermore after applying for auto refinance the interest rate drops to 6% and then the loan will be paid off quicker. The above mentioned example includes the pricing estimates of the above situation. Fact of the matter is the car is brought with a finance package of $10,000, an interest rate of 8.9% and 60 months to be paid. In that scenario each monthly payment will be $207.10 and a final interest bill of $2,426.74. The car is refinanced with an interest rate of around 6.9%. After this sort of adjustment the monthly payments are $197.54 and the interest bill will be $1,853.05. Finally the savings would be $573.09! Now if the loan was at a much higher rate, say 13% or 15% the savings obtained in year 2-5 of the loan would be over $1000!