Like most people, you probably bought a new car and took out a car loan. And if you’re like most people, that loan will eventually need to be refinanced. Whether your credit score has improved or interest rates have dropped, there are several reasons why refinancing your auto loan can benefit your finances. First, this guide covers some of the most common ways that refinancing a car loan can help your finances across different stages of life.
Save money by lowering interest rates.
The biggest perk of refinancing your car loan is the potential to lower your interest rate. The lower your interest rate, the less you’ll be paying each month. So, for example, if you can save just $20 per month on a $200 payment, that saves you $240 in a year—and that’s not even accounting for any possible changes in vehicle value or resale value.
If you decide to refinance into another loan with a longer term, you may pay more in total over time because of the higher monthly payments. However, it may still be worth it if the lower monthly payment is enough for you and helps free up other funds you can put toward savings or investments elsewhere.
Reduce your monthly car payments.
The second benefit of refinancing your car loan is reducing your monthly payments. The lower the payment, the less you will have to spend each month, which will help you save more money. If you want to refinance car loans with bad credit without paying high-interest rates and fees, then online lenders may be a good option.
According to Lantern by SoFi, “refinancing may be a way to lower your monthly auto loan payments, which could help you save money. Just remember it’s important to weigh the pros and cons of refinancing your car before you make the leap and sign up for a specific loan.”
Change the number of years left on your loan.
You can change the number of years left on your loan. For example, if you have had your car for a while and it’s paid off, you may be able to shave some time off by refinancing the loan. This will lower your monthly payments and add up to more savings in the long run.
If you are considering this option, make sure it makes financial sense. First, you need to compare the costs against what else could be done with that money (like investing).
Lower the amount owed on your car loan.
Refinancing may be the answer if you want to lower the amount you owe on your car loan. Here’s how it works:
- Look for a better interest rate.
- Get a lower monthly payment by extending the term of your loan or by taking out a longer-term note (a 30-year loan is common).
- Refinance your current auto loan into another one — just make sure to compare rates among lenders before making any decisions!
As you can see, there are many ways to use a car loan refinance. The process takes less than an hour and is free if you use our service. So why not give it a try? The benefits listed above will speak for themselves once you have your new car loan in hand!