by
David Muir
| Sep 14, 2011
Sometimes we get in over our heads when we purchase a
vehicle. A lot of times we find
ourselves struggling with insurance and car payments each month. The good news is, if you have had a good
payment history with your existing finance company, you may be able to lower
your car payments by refinancing.
There are certainly some things to consider before deciding
to complete an auto refinance. You are
basically signing a new loan when you decide to refinance, though it will be
for less money (the principal owed on your vehicle). You will then be extending the remainder of
the loan over a longer period of time, hopefully for a lower interest
rate. If you are only going to save a
couple of dollars a month, it may not be worth it to refinance your current
auto loan to lower your monthly payments. However, if it will save you more than, say, $20 a month, it may be
worth it to consider auto refinancing.
It is easy to refinance in most cases, as long as you have a
good payment history on your current loan. A quick call to your finance company should be able to tell you if you
are qualified to refinance, and if you are eligible for a lower interest
rate. Interest rates will most likely
depend on the current economy, so you may be stuck with your current interest
rate, but may still be able to extend the length of your loan at a lower
principal to help reduce the payments. While you will end up paying more in the long run by the time you pay
off your vehicle, it can help add extra cash to your pocket on a monthly basis,
making the payments more affordable. Be sure to check with online lenders who
specialize in auto refinance loans. This is where you will usually find the
most cost savings. OpenRoad Lending is a leader in this area and one you should
check out.
Refinancing to lower your car payments isn't for
everybody. If you have plans on paying
off the vehicle and keeping it after you have paid it off, car refinancing may be a
good choice. However, if you are
considering trading in before the loan is paid off, refinancing may not be the
best option. You will most likely end up
"upside down" in your vehicle--meaning you owe way more on it than
what it is worth. In this case, you will
end up dumping the remainder of the loan into the principal on a new vehicle,
and the whole process begins again.