Refinancing your auto loans means swapping your current loan with a new loan from another lender.
The new lender pays off the existing debt, and you begin making regular, hopefully, smaller, payments on the new loan.
If you think your credit has strengthened since you purchased your car, perhaps you can look at auto loan refinancing. There’s a fair chance that you will lower your interest rate and end up with a smaller payment monthly.
You might also be able to shave some time off the loan or go the other way. In addition, extend the term of the loan if you’re having trouble making your monthly payment.
Two Things when You Apply for the New Loan
There are two important things when you apply for the new loan. First is, Most auto loans do not have a penalty for prepayment, so refinancing will cost you nothing.
Second, submitting a refinancing application has no processing costs, and the funds are immediately available, often within a day.
Why You Might Want to Refinance
The prospect of paying less interest or lowering your monthly payments are the main reasons to consider refinancing.
If you just went to your current lender and told him/her to lower your cost, he/she probably would say no. You’ve signed a contract at a certain interest rate, after all, and the lender wants his/her money.
If you meet the requirements, refinancing your car loan for a smaller payment could allow you to put more into savings, investing or a home improvement project. Or you may be able to pay off your car sooner.
All of these options are better than pouring your money down the drain by paying more interest than you need to on a car loan.
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