Car Loan Refinancing – When To Refinance Your Car Loan

Want to save money? Lower your monthly payment? Then refinance

your old car loan. Trade in your high interest rate loan for a

lower rate, especially if your credit score has improved. You

can also lower your payments by extending your loan terms,

helping your cash flow.

Trading In High Rates

When rates drop, refinancing makes sense for both mortgage and

car loans. Factor in the length of the car loan though when

deciding whether to refinance. If you only have a year left on

loan payments, then it won't save you money to refinance since

you have paid most of the interest up front.

You can also reduce your interest costs by refinancing for a

shorter term. Reducing your loan by two years can easily shave

over a thousands dollars off your interest charges, even with

the same rate. Once again, you need to look at how long you have

left on your original car loan to be sure you can save money.

Better Score, Better Rates

If you have improved your credit score since you first secured

your car loan, you may find savings in better rates. So even if

rates haven't dropped for the general market, you may still

qualify for better rates.

Besides making regular, on-time payments, you can improve your

score by reducing your debt ratio. Your score also improves when

none of your accounts are maxed out.

Lower Payment, Longer Term

Reduced rates aren't the only reason to refinance. By rolling

over to a longer term, you can reduce your monthly payment. Just

remember that in the long run, you will be paying more for your

car loan. However, when finances are tight, this option can keep

you from defaulting on your loan or other bills.

Before jumping into a refinancing deal, be sure to investigate

financing companies. Compare their APR, ask for free quotes, and

read the fine print. Also check with your original lender to be

sure there are no early payment fees. The best refinanced car

loans are the ones where you save money. Taking the time to

research financing offers will ensure that you find just such a

deal.

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Written by: Carrie Reeder