Simply put, when you refinance a car loan, you pay off your existing lender and get a new loan at a lower rate and lower payment with a new lender. The benefits to refinancing are well worth the effort it takes to complete one. A significant savings in interest, lower monthly car payments, the ability to build equity faster and get your loan paid off early are just a few. It pays to do your homework and find the right online lender to complete the process.

In order to save interest with car refinancing, the first thing that you will have to do is find out exactly what the payoff amount for your vehicle is. This amount is usually available on the most recent statement. Your final payoff could be higher due to more interest that could accrue since your statement date but this will give you a ballpark of what you owe. Once you have that information at hand, it’s time to apply for the new loan.

While the ability to save on interest with car refinancing is an attractive part of refinancing auto loan, many consumers are also interested in paying the vehicle off as quickly as possible. Depending on your particular financial situation, you may want to consider paying the same amount every month that you are currently paying. With your interest rate lower but your payment unchanged, you can shave months, or possibly even a year, off of your loan. This will mean that you will be able to get out of debt faster and it will be very beneficial for your credit rating. When it comes to saving money and making a budget stretch farther, refinancing auto loan is a great choice.

Most consumers are shocked at the amount of money they can actually save with refinancing. A recent study showed that consumers that refinance their existing car loans save on average $102 per month. If you assume the average remaining term on all car loans is around 47 months; that is a $4,700 lifetime savings in interest payments. A savings of just 1% in your interest rate can make a significant difference in your monthly payments.

So why can you get a better interest rate now versus when you purchased the vehicle originally? It could be one of several factors. This most obvious is the dealership where you purchased your vehicle. You see, the financing is where the dealer makes their largest profit of a car sale transaction. When you refinance with an online lender, you “cut out the middle man” and pay wholesale prices on your financing. The other large factor is your credit score. Your credit fluctuates based on many factors such as outstanding debt balances, number of payments made on time, etc. It is not uncommon for your score to fluctuate 20-30 points monthly. That swing can make a significant different in the interest rate you pay.