In this time of record low interest rates, refinancing is popular on home mortgages. But did you know there was such a thing as auto loan refinancing? Even your car loan can benefit from these all time low interest rates. Even though the term on an auto loan is short, usually up to six years, your monthly payment can be lowered considerably. There are restrictions on who can get an auto refinance. It isn’t really worth it unless you have at least $7,000 left to pay off on your loan. You can also lengthen the term of your loan to further lower your monthly payments.
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. Dealers take advantage of those with poor credit by hitting them with extremely high interest rates. Right now, even those with poor 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 auto loan refinancing. If you are ignorant, the lender will take advantage of that and not give you the best rate.
Most auto loan refinancing does 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 is just like 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, this means that you can pay more than your minimum monthly due and pay off the loan sooner.
Paying your loan off sooner means good things for your credit score and for your budget. You will pay less interest in the long run and therefore, less on the loan all together. Auto loan refinancing 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 back into the loan and get rid of it sooner. Even 1% can make a big difference. Think of what 10% might do.