- Refinancing a car loan can save hundreds on your car payments over the course of a year. This is especially true for high rate loans over 15 percent. The savings goes up as the price of your car goes up, simply because interest is applied to a larger loan amount. Refinancing a car soon can help you avoid several financial messes, give you more money to spend or pay down other debts and help you achieve a little more financial freedom.
- The easiest way to refinance successfully is to compare the rate you are being offered on the refinanced loan to the current interest rate you are paying. If it is more than two percent, it is a good idea to take it. Refinancing at a lower rate will always result in a lower monthly payment, so if it doesn't be sure there are no added charges to your loan. You may also want to be sure the terms of the loan meet your needs. If the refinance company has simply extended your terms and kept your high interest rate, you will pay less each month, but you'll pay more over the long run.
- There are two types of car refinancing, bank and credit union. Each one offers a similar product, however some people may choose a credit union due to the services they offer. These services include professional, courteous service, and a few perks like dividends on your loan, and additional banking products. Not all credit unions will finance you if your credit is bad, however.
- Many car refinancing companies will accept bad credit car owners, and most of them are banks and financial companies. The general conception is that these companies turn down everyone. That's not true. Just because one bank turned down your application, doesn't mean another one will not work with you. Each bank has different criteria. Length of employment for instance may be more important to some banks than a credit score.
- Most people fail to understand the real benefit of refinancing a car. They think that their monthly payment is what it is, and there's no changing it. They just don't comprehend how a few points in interest can affect their bank account. The truth is, even a few points of interest translates into thousands of dollars over the course of a loan, and it will easily translate into real money in your pocket each month. What's more is you can pay off the car faster with a low interest rate simply by making small additional principal payments a few times a year. Generally speaking, if you cut your interest rate in half (say from 20% to 10%) you will also cut your total cost on that car in half. You could save $3,000 to $10,000 just by refinancing.
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