If you are disturbed with the huge burden of Auto Loan then why not give refinancing a try? Many people don’t know about that they can refinance their existing Auto Loan just like mortgage refinancing. There is no doubt about the great benefits of Auto Loan refinancing. Unfortunately, people who are unaware of it don’t know that it could help them to cut the heap of Auto Loan. They can save a good cash amount on their monthly Auto Loan payments.
Many people are unwillingly paying off higher interest rates on their existing Loan just because of the ongoing economic recession. With Auto Loan refinancing you can cut down huge monthly Loan payments and can have lower interest rates on your Car Loan.
There is a misconception associated with Auto Loan refinancing and it is that people often think that they have to get an appraisal done on their existing Car. However, it is not the case due to the fact that a Car does not contain as much equity on it as a home does. The refinancing of your current Auto Loan is highly dependable on the amount of your current Auto Loan you still have to pay on a specific Car.
Increase Your Repayment Ability
When you refinance your Auto Loan, you can repay the existing Loan with the refinancing Car Loan which you take out from different lender who offers you a Car Loan with lower interest rates. You can get lower interest rates on your Auto Loan with refinancing and by this way you can save a lot. This feature of refinancing enables you to pay off your existing Car Loan in quick time.
Refinancing is ideal for borrowers who are bearing high interest rates besides bad Credit score and cannot afford to pay off high rates on monthly basis. The basic purpose of refinancing is to lower the interest rates on Car loans and makes it is affordable for the borrower.
Refinancing Helps in Boosting Credit Score
You can get your Auto Loan refinanced in a quick time. You can boost your Credit score with the help of refinancing. It is because it cuts down a portion from your monthly payments and makes them affordable making it appropriate for you to get your bad Credit score back on the right track. You should not forget about the importance of your Credit score. You might want to take refinancing as soon as possible if you cannot afford monthly Loan payments. If you have a poor Credit history then be ready to face high Insurance rates and high interest rates on other debts that you might want to take out in future. Poor Credit history can affect your ability to qualify for a Loan, so it is wise to refinance your Car Loan now and save money on Car Loan.
It’s possible to increase your income by starting to look at your monthly budget. The second largest expense category for an average American is transportation, behind only housing costs. On average, we spend $9,500 per year on transportation, which is almost $800 per monthly. While transportation costs include gasoline and repairs, the biggest portion of transportation expenses is the purchase of vehicles.
A lot of new cars are bought with loans so it is worth looking into ways to lower your car payments. A auto loan calculator will help you see the impact each factor has on your monthly payments.
Lower your car payment
Option 1: Refinance to reduce your car payment and get a lower interest rate
Refinance an existing car loan is the fastest way to lower your monthly car payments. Your interest rate can be reduced by an average of 2.4%. Another way to describe how much a loan will cost you is by calculating the Annual Percentage rate or APR. Why aren’t we looking into refinancing our car loan? The answer is right in front of you. We can refinance car loans.
While 2.4% may sound small, it can add up to more than $2,200 in savings over your loan’s life. This is nothing to be ashamed of. Average car loans are about $32,000 and the average term is approximately 68 months or over 5 1/2. Let’s say you refinance five years after buying your car. A 2.4% decrease in your interest rate would reduce your car payment by more than $30 per month. Multiply $30 over 64 months and you will save $2,304. You can now use the $2,304 you save to pay off high-cost credit card debts or go on vacation. Congratulations!
Option 2: Refinance to reduce your car payment and extend your term
A shorter term for car loans means that you will pay less interest over the loan’s life. However, a longer loan term can result in a lower monthly car payment, sometimes even a significant reduction. With over 1 trillion dollars of outstanding loans, the car loan market is huge. This means that every type of investor and lender is involved in the auto-loan market. You may be surprised at the range of car loan terms that are available. The loan terms can go up to 84 months or more.
Let’s look at a typical example. Let’s say you have $25,000 principal and 50 months left on your car loan. The interest rate is 5%. Your monthly payment would drop to about $550 to $470 if you refinance to a 60-month term at the same rate of 5%. This would leave you with $80 each month in budget savings. While it is true that you will pay more interest expense over the term of your new 60-month term, there are other times when this can make financial sense.
Option 3: Buy used to lower your monthly payments by $136 for your next car purchase
We all know that your new shiny car loses 10-20% of its value the minute it is driven off the lot. There is nothing that has changed, except that you now own a used vehicle. The rapid decline in car value is a problem for new car owners but it’s good news to used car buyers. The reliability and longevity of cars is better than ever. This means that used cars offer more options than ever before for many people. The best part? The average monthly payment for a used car is approximately $400 while the average monthly payment for a new car costs $536. This $136 difference can make a big difference.
Option 4: Trade down to lower your car payments
Perhaps you bought too many cars. It is difficult to park the 8-seater. You and your children won’t be impressed by the leather seats in this luxury minivan. You can sell your car to buy a cheaper model. This option is even more appealing and convenient because of the proliferation of online services which will purchase your used car like Carvana. You can quickly receive a quote by simply entering basic information about your vehicle on these websites. These companies will come to your house and pick up your car. This check can be used to pay off your car loan and purchase a smaller, more affordable vehicle.