Auto Refinance continues to be a money saver for many.
You have probably heard of auto refinance before. Or simply refinance. The term “refinance” actually refers to a financial situation wherein a borrower finds financing to pay off a current loan. It’s really pretty simple and not difficult at all to accomplish. Auto refinance is done less often than it is in the real estate market, specifically with home ownership. In fact, refinancing is one of the most popular methods of getting financing for a home loan.
With auto refinance, the same thing applies. Auto refinance is basically paying off one loan with a new loan. The goal of auto refinance is to allow you, the borrower, to save some money from your monthly loan obligations. That can be in reduced monthly payments and/or in reduced interest APR that also helps lower the monthly payment. And as such, it is one of the best kept secrets in the financing industry. For years now, people have refinancing their homes and saving thousands of dollars when rates go lower. However, the practice of refinancing car loans has not quite been at the level of home refinance, but it has clearly gain popularity with interest rates having been lowered to 25 year lows.
One thing that is so often overlooked is that if you have improved your credit over say, six months, you can actually get a lower interest rate than when you purchased your car. This is almost always true if you’ve had a few late payments in years past but have been on time and have taken control of your credit lately. Why don’t more people know this? Perhaps the reason is most people don’t know that since an auto loan has so much less paperwork associated with it, compared to home loans, they are naturally skeptical about how simple they are. Regardless, auto refinance is still a good choice for many people, provided that the situation is right, you’ve done your home work and you are serious about keeping your credit in good shape.
When to get an Auto Refinance Loan
The way for an auto refinance loan to benefit you is if you can get it when the interest rates are lower than when you originally made the purchase. This is true for auto and for Mortgage rates. Rates tend to move up and during economic challenged times, they move lower. Therefore, since interest rates are low, then it’s likely that auto loan rates are low also. Low auto loan rates typically mean lower monthly repayments can be obtained and that you can save money in the long run by reducing the APR on the loan.
Only few people really understand the time value of money. In other words, you need to keep in mind that the longer you pay for a loan, the bigger amount of money you actually spend for it. It simply costs your more of your cash to pay for the loan. Thus, in some poor credit situations, by the time you get the loan paid off, you could have paid more money on interest than on the principal. Just make sure you take control of the situation and don’t allow that to happen. This is why auto refinance is important for it is one of the few methods that could help you minimize loan costs and maximize your savings.
Who can benefit from Auto Refinance?
Almost anyone with an auto loan to his name can benefit from auto refinance. Even car buyers with bad credit can obtain auto refinance as a way for them to lower down their APRs. Let’s say, for instance, you make an auto refinance loan for $16,500 on a new Honda Accord. At the end of six months, you agree to pay off the amount at 21% APR. So for a few months, while you might be working on getting your credit back in shape with on time payment and reducing your overall debt, your monthly loan payment will be $446.
After say 4 months, you decide to apply for an auto refinance loan. However, this time, your loan rate is at 6% APR. Your current monthly payment is $446 which gives you total interest charges of $10,283 at the end of your loan period. Your auto refinance loan offers you a monthly payment of $319 with total interest charges of $2,639. Thus, by refinancing, you can save up to $7,600. Yes, it really is possible. Apply now to find out if you can benefit from an auto refinance loan.