As with any other loan, auto loans
can be refinanced as long as the original loan doesn't
have any pre-payment penalties. But when should you
refinance an auto loan? The answer is when you can get
a lower interest rate that will make paying off your
loan faster and easier. If you have bad credit and you
received a car loan with a high interest rate, you may
be able to qualify for a refinance car loan that will
cost less. Depending on the age of the car and the amount
you owe on the loan, this could save you a lot of money
The best time to refinance a car
is when interest rates have reached a low point. Even
if you have bad credit, you may be able to earn a lower
interest rate. After a year of making steady payments,
your credit will begin to look better. This is the time
to consider refinancing your auto loan. You should try
to refinance your car as soon as possible if you are
looking for a lower interest rate.
You can do this easily by visiting
your bank, credit union, or using the internet to find
a lender. There are many lenders that work with people
on bad credit auto loan refinance. You will be able
to qualify for a lower interest rate that will make
paying off your auto loan even easier. You original
loan will be paid and you will begin paying off the
new loan. Your new lender will use the blue book value
of your car in order to determine if the loan is worth
it or not. If your car has had some damage due to an
accident or other type of incident, lenders may not
want to refinance the loan. Ask the lender what their
criteria is for refinancing cars.
Reasons to refinance your car include
- Monthly payments are too high
- Federal interest rates are lower than before
- You are planning on keeping the car after it
has been paid off
- You need extra money for other bills
It is important that you make regular
monthly payments on every loan you take out. This will
enable you to rebuild your credit if it is poor, and
it will help you receive lower interest rates the next
time you take out an auto loan. Loans that you repay
in full will raise your credit score and will make taking
out future loans much easier.
If you have bad credit and are trying
to rebuild your credit, you may want to look for ways
to lower your monthly car payment so that you will be
able to use the extra money to pay off other bills.
When considering bad credit car refinance, make a list
of every monthly bill and loan that you have. Create
a monthly budget that will allow you to begin paying
off these bills so that your credit score will improve.
Refinancing is one way to free up some of your money
so that you can use it to pay off other bills.
Not everyone should look into refinancing
their auto loan, however. Reasons you should not refinance
your auto loan include the following:
- Depending on what your current interest rate
is and the length of time you have left on the original
loan, refinancing could mean more payments. Even
though these payments are lower, you will be spending
more money over time. Switching to a new loan that
includes a lower interest rate, but more payments
may not save you much money depending on what you
owe on the car.
- If you are planning on selling the car in the
next year or two, you may not want to refinance
because you will need to pay off the car before
you will be allowed to sell it.
- New car loans usually have a lower interest
rate than used car loans. By switching, you may
end up paying a higher rate depending on the age
of your car.
- If you owe less than $7,500 on your loan, most
lenders will not allow you to refinance because
it is not worth it to them financially.
These are just a few of the
reasons not to refinance a car until you have determined
that you will save money and pay your car off sooner.
This does not mean that you should not consider
the possibility of refinancing, just make sure that
you will save enough money to make refinancing worth
As with any financial decision,
you will have to weigh the pros and cons carefully
before signing any paperwork. For many people refinancing
their auto loan will enable them to pay the loan
off faster and have a lower monthly payment. But
this is not always the case. Some people are better
off paying off the loan they already have.
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