Why do people refinance their car loan? Refinancing is a way to save money because by it you'll have the opportunity to change a loan that has a higher interest rate to a lower one and with a shorter term. The company that offers the refinancing would pay the customer's balance from the existing financing company, and then they would agree upon on the interest rate and the period of payment or term.
A Solid Example
For example, a car that has a finance package of $10,000 and an interest rate of 8.9 percent for 60 months would have a monthly payment of $207.10 and the final interest bill of $2,426.74. With your refinancing, meanwhile, supposing the interest rate is put into just 6.9 percent, the monthly payments are at $197.54, and the final interest bill would then become $1,853.05. This would mean having a savings of $573.09.
Improving Your Credit Report
Aside from this, refinancing could also improve one's credit status. Customers with an existing financing that has a higher interest rate and a longer term have found it hard to pay their mortgages and other loans. Default in payment can then be reflected in your credit report, which could then bring down your credit score. The problem with this is you will be having a difficult time later on to avail the kind of loan you want.
But with refinance, you will be able to improve your credit standing. You could also save with refinancing through claiming rebates and incentives after the refinancing company had paid the full amount of your loan at an earlier time.
Shopping for the Right Car Refinance
The first thing that you would do is to look for other lending company that would offer car refinancing. You'll have to look around for those having the best deal. You could find a lot of online lending companies that are offering car refinancing nowadays. Remember that you'll have to look for another lending company, not the existing one. In your application, be sure to include every detail including your personal information, current loan information such as the existing interest rate and the term that you are currently availing, and the type of car loan you want, including the new rate and term.
Car refinancing could have disadvantages too. If your current loan has a prepayment penalty and then the money you could save from refinancing is lower than paying for this penalty, it would not be advisable to have the refinance. Having a low credit score could also be another factor. The best thing that you can do is to at least bring back the glory of your credit score by opting for ways and means to increase your income and be back on track in paying your due. Lastly, it would not be good to avail of a car refinance when your current loan has already been almost paid because it would only incur you more cost. So if you have a five-year car loan that has only two more years left, it would not be worthy to avail of them. In any case, if you're having difficulty with your car refinance, ask help from an expert.