Posted by Malini Somra on October 2nd, 2019

Refinancing is when you have your auto loan paid off and replacing it with a new one, most times with a different lender and on a new loan terms. Your current lender will work with your previous lender to ensure that you conveniently continue with your monthly payment without any hassle.

The need to refinance your car may be because you are looking for ways to save more, get a more affordable loan, or you are looking for better loan terms. Usually, most borrowers are looking for loan terms or opportunities that will allow them to make lower monthly payment, lower APR, reduced interest rate, make the loan shorter or longer depending on their situation. 

Possible Outcomes of Refinancing an Auto Loan

  •              Lower Interest Rate: One possible outcome of refinancing a loan is to get a loan with lower interest rate, which means the borrower will be paying less over the entire duration of the loan. The interest rate you will be able to negotiate will depend on a couple of factor like if you are able to get a cosigner, or you are able to make a significant down payment. It also depends on the market rates, your lender and the credit score of the borrower.
  •              Lower Monthly Payment: A lower monthly payment may result from reducing the interest rate while elongating the duration of the loan or doing both at the same time.
  •              Longer Loan Duration: If you extend the loan term, this means that you will be paying over a longer period of time with a reduced monthly payment but a higher interest rate and this means you will be paying more due to the increased interest rate at the end of your loan term.
  •              Shorter Loan Duration: You can also refinance your loan in order to shorten the loan duration. In this case you will be paying more monthly but at a reduced interest rate and you will be saving more at the end of your loan term.

 Apply with a Good Lender

If you wish to refinance your car loan, make sure you apply with a good lender who will offer you a better deal and also make sure the lender is out to work in your best interest as we have a lot of lenders out there who are ready to scam their customers.

Transaction Fees May Apply

Also note that transaction fee may apply when you apply to refinance your car loan. Thus transaction fee can either be paid up front or rolled into your loan amount and this will also attract an interest rate.

Use an Auto Loan Calculator

You can use an online auto loan calculator to estimate how much it will cost you to refinance your loan with another lender. This will help you to know if it will be the right decision for you to refinance your loan or not. Input figures into the online calculator and see what your monthly payment will be and see whether it will work for you.  

Car loan buying on leasing -

Like it? Share it!

Malini Somra

About the Author

Malini Somra
Joined: July 11th, 2018
Articles Posted: 52

More by this author