What is Car Refinancing?

Have you ever thought about refinancing your car?  This would not be your first thought when thinking of cutting back on your finances or saving pennies, would it? Well, you’re not alone.  Most people are unaware that they are able to refinance a car, and furthermore are unfamiliar with the process by which it can be done.  As a result, here are a few tips to help in highlighting the benefits of car refinancing.

The process of refinancing a car is fairly easy and doesn’t take the time you might think it would.  It takes numerous hours and paperwork to refinance your home right?  One would think refinancing your vehicle would be similar. This is not the case. You can simply apply on-line with one of the many auto refinancing companies, and usually get a response within 24 hours, and that’s it!  The only thing you need to do before hand is to prepare yourself for the few minutes it takes to fill out the application. 

• Find out from your current lender your payoff amount and APR.
• Have all your vehicle information ready.
• Most of the time lenders will not refinance their vehicle loans.  Look into other lenders for your refinance process.
• Do some research to find out if your car has retained is value so you aren’t paying more on your refinance than the car is worth.
• Go online and contact a refinance company.  Make sure their APR is less than your current APR.
• Find out when your next payment will be.  Sometimes you are able to skip a month depending on when you refinance.

• Receive a lower monthly bill for your car loan.
• Lowering your interest rate, which will shorten the length of paying off your loan.
• Get a fixed rate so you won’t have to worry about your monthly bill changing.
• Possibly save thousands of dollars.  Save money in hard times and/or the ability to use your money where you need it most.

Your lender charges you 21% APR on a 60 month loan for the loan amount of $18,500.  Your payments are around $500.  That’s a lot!  There are a lot of companies out there that have charged high APR’s to unassuming clients that may have felt they received a deal because of low or unseasoned credit.  If you refinance a car and get an APR of 8% on that same loan your payments will now be around $384.  What a difference!  Consequently, you benefit from your loan being paid off at a faster rate and your end result will be less interest paid to the company and less out of your pocket.  Your interest paid would now be approximately $4,500 instead of an outrageous $11,500!  Now you can use that money for your groceries, savings, or what you so desire.

Example:

Loan

APR

Months

Monthly Payment

Total Interest

Total Paid

$22,000

18.5%

60

$564.00

$11,800

$33,800

$22,000

7.5%

60

$440.oo

$449

$26,400

You can benefit from car refinancing in many ways.  The notion of this doesn’t usually come to mind when thinking of how we can facilitate our bills in a different fashion to best fit our financial debt.  If we educate ourselves in alternative means, we are able to have the freedom to make better choices in turn.