Refinancing is done to save borrowers money by reducing their monthly payments. The process may not have a flat fee associated with it, but it could cost you in the long run if you're not careful.
The Price of Refinancing
You may face refinancing charges in the form of application fees, early termination fees on your existing loan, or other fees, but there's no flat rate or hard cost to refinance an auto loan. The costs involved in refinancing are generally minimal compared to the savings you may get.
Refinancing Your Car Loan
To refinance your car loan you apply with a lender for a new contract on your existing vehicle. If you qualify, they pay off your old loan and you get a new contract with new terms. This is done to lower your monthly payment, typically through a new lender.
There are two ways in which you can save money on your monthly loan payments through refinancing: a lower interest rate, or a longer loan term. If you qualify for both a longer loan term and a lower APR, you can save the most month to month.
However, know that the longer you loan, the more you pay in interest. If you simply stretch your loan without lowering your interest rate, your monthly payment will still be lower, but you end up paying more overall.
Ready to Refinance?
In order to qualify for refinancing, both you and your vehicle have to meet the requirements of the lender. These can vary, but generally, you must have good credit, have had your loan for at least a year, be current on your payments, and can't have negative equity in the car. Beyond this, your car must fit into the lender's age and mileage requirements, and your loan amount must be within their acceptable range.
If you're a borrower with bad credit, your credit score has to have improved since taking out the original loan in order to qualify for most refinancing. If you think refinancing is for you, we want to help you find a refinance lender in your area. Simply fill out our secure refinancing request form to get started.
Refinancing Not For You?
If refinancing isn't in the cards, or you want to save money by getting a more affordable vehicle, a trade-in may be the way to go. This way you can use any equity in your vehicle as all or part of your down payment on your next vehicle. At CarsDirect, we want to help you find the right lender for your situation. To be connected with a special finance dealership in your area, simply fill out our fast, free, auto loan request form today.
