With interest rates remaining at all-time lows, refinancing continues to be popular for home mortgages. But did you know that you can also refinance your car loan as well? Even though the term on an auto loan is usually less than a mortgage, your monthly payment can be lowered considerably with an auto refinance.
Hundreds, even thousands of dollars can be saved every year if you refinance your high interest rate for a lower one. If you have less than perfect credit it is especially important to refinance your car. Right now, even those with less than perfect credit can get a fairly good interest rate. It will not be three or four percent like prime customers will get, but less than ten percent is likely. Make sure you know what your credit score is before negotiating an auto refinance. If you don’t know then the lender could take advantage of that and not give you the best rate.
Most auto refinance deals do not have prepayment penalties attached. A prepayment penalty means that if you decide to pay your loan off before the term agreed upon, there is a penalty you must pay. It’s similar to the contract on your cell phone. You have to keep that cell phone plan for whatever time you agreed upon, or else you pay a hefty fee to terminate your plan early. On your auto loan with no prepayment penalty, you can pay more than your minimum monthly due and pay off the loan sooner.
Paying your loan off sooner can have a positive impact on your credit score and for your budget. You will pay less interest in the long run and therefore, less on the loan all together. An auto refinance can help you get into the position to do this. Not only will you save lots of money in interest, but you will have the option to put your extra money toward paying off the loan sooner. Even 1% can make a big difference. Think about what a 10% interest rate savings might do for your monthly budget.