Refinance your car or auto loan

As interest rates drop to historic lows, many people are focused on refinancing to help them save on interest costs. However, they always think of refinancing their home loan. What many do not know is that refinancing their auto loan is easier to complete, it can be done in under 10 minutes, and it can save you some significant money (potentially thousands of dollars) on your car payments.

How Does Refinancing a Car Loan Work?

If you know how home refinancing loans work, then you pretty much understand how auto loan refinancing works as they are very similar. Refinancing an auto loan is far cheaper and easier than refinancing a home mortgage. There's no need for an appraisal and borrowers can usually find out if they've been approved within an hour of applying online.

Lenders work with banks to get you a new car loan. This new financing is then used to pay off your existing automobile loan, so you will still have one payment. Refinancing your car loan can save you money by lowering your interest rate, and thus lowering your monthly auto bills and car payments. The bottom line is that are often lenders and banks who will offer you a lower interest rate on your car loans in order to get your business. It is always worth your time to at least check for a lower rate, as it is free to do.

Sometimes a customer may not qualify for a lower rate, but they can still reduce your monthly payments. This can occur with a longer loan term. For example, if the new loan adds monthly to the time you have to repay your car loan, then this extra time should in effect reduce the monthly auto loan payment.

How much can refinancing an auto loan save?

Say you bought your new car six months ago. And say you do not have the highest credit scores, or had difficulty with financing in today’s environment when you bought that car. The automobile dealer told you that your auto loan would be 8 percent on a five-year loan for a $23,000 car. So using this example your monthly payments are currently $465 per month.

Now lets say you contact a company that provides auto refinancing. You can refinance the balance of your car loan, and lower your car payments to around $400 a month. That is equal to a savings of almost $5,000 over a 60 month period of time, the life of the loan.

 

 

 

National lender Wells Fargo states that customers who have refinanced or cashed out their auto loan with them received an average of $4,987 in cash savings. Read more on Wells Fargo auto loan refinance and cash outs.

Auto loans refinanced by Capital One have led to borrowers saving on average $500 per year on their monthly car payments. Learn more.

Bank of America also offers an auto loan refinancing product, and they are one of the major lenders that operates in this marketplace. Continue.

All it takes is about 10 minutes to fill out the refinancing application, and by refinancing your car loan at a competitive rate your monthly monthly car payments can be slashed.

Fees to refinance an automobile loan

Any time a consumer takes out a loan, or refinances a product, or in general deals with any financial matter you always want to be aware of fees and charges.

In almost all auto loan refinances, there will be charges to both transfer the title of the car loan as well as reregister your car. These fees vary depending on the state you live in and the lender you refinance with, but the total cost of these various fees in general shouldn't exceed $50 in most states. Many banks or lenders will also charge a processing fee to refinance, in which the amount of the charge will vary widely.

Who should consider this service

Refinancing your auto loan should be of particular interest to those people who obtained their car loan directly from a dealership. The reason being is that because dealers always serve the role of a middleman in the financing transaction. A dealer will almost always increase the interest rates they get from lenders, and therefore pass along to the buyer, to make money from the buyer. Another reason to refinance a dealer loan is most dealers are leaning more heavily on extra services and products, such as auto loans, for profits as shoppers get savvier about researching car prices online and it becomes harder for them to make money on the sale of the car itself.

 

 

Also note that that refinancing your car loan may be particularly beneficial to borrowers whose credit scores have improved since they first obtained their loans. This is more common than not, and it is usually because borrowers have been making timely payments.

Lastly, as the economy improves and more lenders and banks enter the auto loan origination and refinance businesses, there are more competitors and lenders to choose from, so the interest rates you find can be cheaper.

If refinancing my car loan is such a great deal, why don't more people do it?

Good question. The general consensus is that most people do not know that they can refinancing their car loan. Another of the big reasons is that people who do know about this expect the same kind of application-intensive process that they need to do to refinance a home loan. However, it is a 5-10 minute, quick process to apply, and that is your only risk. As mentioned above, it is so quick and simple to apply, you should always try.

Find out how to save hundreds of dollars on your car insurance bills, or how to get help with your credit card debt. Lower your car expenses and your monthly car payment will allow you save money, or apply the savings towards other bills and debts.