Chances are that refinancing your car loan has already crossed your mind. With interest rates falling, and more importantly looking to settle there, car loan refinancing can be a huge money saver for you.
There are, however, chances that you might be rushing into making a decision on refinancing without adequate research. Here are a few scenarios where refinancing can be a good option for you:
Dropping Interest Rates
If you find that the interest rate has plummeted more than a couple of points after you have purchased the car, it might be time to think refinance. These kinds of loans are termed “Used Car Loans” and the interest rates are usually better than new car loans. A small difference of even a couple of percentage points can amount to a huge saving for you over the life of the loan.
Improved Credit Score
If you find that you have been making a lot of improvement on your credit score, chances are that a refinancing option may add to your savings. If you purchased a car with a less than healthy credit score, but have subsequently managed to improve it significantly, you may now qualify for a lower interest rate. People with a stringy credit history often find themselves saddled with interest rates of 18% or more. With time, as regular monthly payments appear, this rate can be refinanced by the lender to make it much lower. It is important for consumers to regularly check their credit scores to keep on top of their credit history as it plays a crucial role in auto loans.
Didn’t Get a Good Rate on Purchase
Vehicles sourced by the dealers usually carry a higher rate than a consumer would want. While this is not something most consumers know, it is important in terms of getting the right refinance deal. You may have a stellar credit history but chances are that you may have gotten a lemon of a deal on your interest rates. If you discover that this is the kind of deal you have received you can seek a better interest rate.
Personal Financial Setbacks
If you have recently been party to a situation where you have faced a lot of expenses and find yourself strapped for money, this could be a handy solution. You can ask for your loan tenure to be extended which would lower your monthly payments. This can give you time to not only pay off the loan but also stabilize monetarily.
There are a number of factors that one needs to be wary of when going in for refinancing. If your vehicle is valued lower than the loan balance of your car you may not get the option of refinancing. The age of the car, outstanding balances to be refinanced are also factors that can halt your refinance possibilities.
It is important for anyone going in for refinancing to take into consideration all the possibilities and options at hand. There are a number of ways that refinancing can help save you money, the only way to figure out the best deal for you is to do the research.