Perhaps you are a car owner and you feel the “midstream crisis”: you’re halfway through your car loan payment, but you have some regrets about your financing.
You can decide to stick it out or take another route such as refinancing you auto loan for cash savings. But don’t be too impulsive. Don’t jump too quickly into a new credit loan. It will lead to repeating the same bad money mistakes.
These are the seven most common questions you should ask when refinancing your car.
1. What does refinancing an automobile do to your credit score?
If your credit score was not high when you obtained your first auto loan, it is worth checking to see how much your credit has improved since then.
2. How soon can you refinance car loans?
ILending of the can does finance explains that it is basically like starting over. This can make your credit score worse and help you determine if the loan fits within your budget. You shouldn’t refinance when you are paying off the majority of principal and interest. There isn’t enough money to save your time or money.
3. What are the best ways to find the lowest interest rate?
Don’t fall for the temptation to grab the highest interest rate on your auto loan. Research credit and lending websites. Look into the offerings of other banks and credit unions. Do not forget to contact your existing lender. An auto refinance with them can make the transition to a new loan financially simpler.
4. What is the impact of interest rates on my car payment?
You could also save money if you have a shorter loan term with lower monthly payments. This is because most of the payments are made up of interest.
Christensen explains that not many people are aware of the amount of interest in their monthly car payments. Even if refinancing a loan with shorter terms does not significantly reduce your monthly payments, it will cut the overall interest expense.
6. What effect do ltvs/dtis have on my loan?
Your car is always going down. Edmunds.com says that your car may lose between 15 to 25 percent of its total value within the first five-years. This can disappoint those who realize that their new loan terms reflect the current depreciated condition rather than the original.
7. What should my attention be drawn to in the fine print?
All loans come with hidden charges. There are also other factors that lurk deep within the fine print. But some of these factors are unique to refinances. Janssen said that many extras that you may have added to your auto loan (such as gap or insurance for disabled people) don’t transfer to the loan. Be aware of any additional fees such as prepayment penalties or loan processing charges.
However, the real financial risk is not asking if refinance rates are available. Many credit unions or banks offer loan discounts, including refinance rate drops. Since it’s free money, missing these could be your biggest error.
