Pick up any auto magazine and there will be hundreds of advertisements for auto loan refinancing. They all direct you to web sites that make refinancing seem irresistible
The benefits of refinancing are always set out in great detail. What of the disadvantages
Auto loan refinancing entails taking out a new loan to pay off your old auto loan. Under current law the new loan must be taken out with a new loan company.
There is a charge for early repayments do refinancing may not save you any money. So it is a good idea
The answer is that it can - in very specific cases. Auto loans come with a fixed rate of interest. Interest rates change over the life of a loan. If interest rates drop several points, either as a result of changes in bank rates or as a result of your own improved credit rating, it can make sense to refinance your loan.
The other time that refinancing may be appropriate is if you cannot keep up with existing repayments. By refinancing over a longer period you may be able to reduce your monthly repayments.
Disadvantage
The biggest disadvantage to you is likely to be cost. Most refinance packages are taken out to lower monthly repayments by extending the loan period. While your monthly payments may drop you will pay more overall
There are also a number of limitations on refinancing. Your car must be worth more that the outstanding loan. The outstanding loan balance must be at least $7,500. These 2 criteria mean that relatively few people can benefit from refinancing
Usually, if you have less than 4 years to run on your existing loan and you cannot get an interest rate better than 2% lower then you are unlikely to gain by a refinance loan.
Refinancing to lower repayments by extending the loan may be a fact of life for some. Life doesn't always run to course. Just remember that those lower repayments can hide the total amount you pay back in the longer term. Of course, you may not have a choice.
