By Courtney Leigh Updated on Jan 15, 2020
Refinancing can be a attractive method to reduce your car finance costs. Placing just a little cash that is extra your pocket can deal along with your month-to-month budget or save yourself for future years. But, it is essential to know the potential risks which can be also involved in refinancing your car loan.
Once you refinance your auto loan, you’re paying down the balance in your initial loan and changing it with a brand new loan. Oftentimes, this involves you to definitely alter lenders, since many lenders will perhaps not refinance its very own loan. Nonetheless, refinancing your car loan will allow you to if you wish to decrease your payments that are monthly even adjust your loan term.
Three circumstances when car loan refinancing makes sense
1. Cutting your rate of interest.
You can find a variety of reasons you could be stuck with a greater rate of interest in your car loan, but at the end of the afternoon, it may be costing you hundreds or 1000s of dollars within the lifetime of the mortgage.
For instance, let’s say you borrow $20,000 for a car with an intention price of 6% and a 60-month term. Over the life of the mortgage, you’d spend nearly $3,200 in interest. Now, you would pay a little under $1,600 in interest over those five years if you took the same loan and term, but had an interest rate of 3.