subject: 3 Refinancing Car Loan Tips That You Should Consider [print this page] 3 Refinancing Car Loan Tips That You Should Consider
If you currently have a loan for your car and looking for a way to reduce monthly installments to save some money, then you should consider refinancing. A refinancing car loan could be a smart option for you to lower your expenses over time. Banks and other companies generally assume that their potential clients don't know anything about this topic, so they rarely offer the best deal when you contact them the first time. This is why it is strongly advised to contact a financial expert before you try to refinance your automobile at another lender. In this article, I'm going to share some important information about refinancing car loan solutions to help you make the best decisions.
Refinance if your lender can lower the interest rate by at least 6.9%
When you are refinancing your car, a new loan will become practical if the interest rates are lower. An additional factor to help with your decision is the period of the loan. In case you've still got one year to finish your loan term, refinancing would not be a sensible option because you already paid back most of the initial amount and will not save any money in this way. On the other hand, if you're able to lessen the interest rate to save at least 6.9%, on the life of the loan, you can divert this amount of funds to additional expenses.
Superior credit rating will give better interest rates
When you pay back your credit debt on time, and you don't have lots of unused credit cards, your credit score is considered to be good. This means that you can be eligible for much better rates, whether or not the interest rates are lowered in the overall market. It's also possible to improve your credit score by lowering the debt ratio besides making the loan payments on time.
Longer loan period and lower repayment
Lowering the interest rates will not be the only solution to consider when you would like to get a car refinancing loan. It is possible to lower the monthly payment amount besides lowering the interest rates if you ask your new lender to extend the repayment period. However you need to understand that some lenders don't prefer this solution, so they may allow the extension of the car loan repayment period only if you pay more on the long term.
I also need to mention, that the timing for a refinancing car loan will be another essential factor. Never refinance at a time that won't enable you to take advantage of lower interest rates. You will need to spend some time and evaluate the circumstances and then make a decision. Remember, always check your credit score before visiting a new lender, because they might not tell you your real credit score so they can offer a deal that keeps more money in their pocket.
