Interest rates have dropped over the last 14 month and are at the lowest level that we have seen for many years. With the economy struggling as it is, many people’s thoughts are turning to refinancing — refinancing their home loan, and yes, even refinancing their auto loan. What many have discovered is that refinancing an auto loan is easier to do, has fewer hassles than a home loan, is quick to do online and that it can save you some serious money.
So how much are we really talking about here? For example, let’s say you bought a new car in the summer of 2008. Just for this example, let’s say there were a few blips on your credit report that lowered your score and so the dealer told you that your auto loan would be 11 percent on a 60 month loan for a $24,000 car. Your monthly payments are $500.
Now let’s say that you look for a car loan refinance and you find an actual finance company that will do the application and approval process all online. There are big differences in licensed finance companies and websites that promise to refinance and just sell off your information. But that’s another story, for now, you have determined that the website is legitimate and actually works for you to get you refinanced. That’s great because, as we identified earlier, rates are now at the lowest point in years. If you want to lower your payments, do another 60 month loan.
If you want to lower the overall cost of the loan, refinance the balance that you owe on the car and do so in the fewest amount of months that you can, as long as you can handle the monthly payments. You could refinance the balance of your car loan and lower your payments to about $350 a month.
How? Because ideally, you have not only improved your credit, but you have been offered a very competitive interest rate and that could translate into a savings of nearly $6,000 over the life of the loan.
We could run a number of scenarios but one quick way to check out rates and payments is to use an auto refinance calculator to estimate payments and loan costs. Other examples could well be more dramatic. In some cases, a new-car buyer could wind up with an auto loan based on an 18-percent interest rate. By refinancing at a competitive rate, the monthly payments would be slashed, and all it takes is about 10 minutes to fill out the application.
Regardless, you could save some cash by investigating the possibility of an auto refinance loan and get the New Year off to a great start. Good luck and good financing.