Is Auto Loan Refinancing a Good Option

Is refinancing your auto loan a good option? If you’re thinking about it, the answer will depend on your particular situation. Here are some things to consider before you take action on refinancing your auto loan with Bank of America or another bank or lender.

What is Auto Loan Refinancing?

It’s an option that enables you to get out of one loan and into another, often with better terms. This can be an ideal way to free up some extra cash—particularly if you have an older car that you’re still paying off but want something newer. You may even refinance just for a lower interest rate; interest rates on auto loans tend to be quite high, so it’s possible to save money by refinancing your current loan for another one.

How Do You Know if Auto Refinance is Right for You?

Before you decide to refinance your auto loan, there are a few things to consider. First of all, make sure that refinancing your auto loan is even possible. If you have equity in your car (meaning you own more than half of it), then you’re likely eligible for refinancing. Lenders look at equity because they want to make sure that their investment is protected.

If you’re able to refinance your auto loan, there are a few factors that can help determine whether it makes sense for you. If you’re able to refinance your auto loan, there are a few factors that can help determine whether it makes sense for you. Auto loan refinancing with bad credit is possible, but it depends on two main things: 1) How bad is your credit? or 2) how much do you owe on your current car loan?

Common Benefits of Refinancing Your Auto Loan:

• Lower monthly payments. The lower interest rate you get from refinancing could mean lower payments.

• Fixed payment. Another great benefit of refinancing your loan is that it offers you peace of mind.

• Better interest rate. Auto loan rates depend on several factors, including your credit score and current market conditions.

• Avoid costly penalties. Common penalties associated with refinancing your auto loan include prepayment fees, extension fees, and early termination fees.

You might also have an opportunity to increase your loan term, which reduces your monthly payment even more. You’ll need to do some research on current interest rates to figure out how much you can save, though it’s possible that refinancing could result in higher payments if you can’t qualify for enough of a reduction.

Tips to Find the Best Auto Refinance Company

Choose a lender that is willing to work with you, regardless of your credit history. This shows you can rely on them in stressful situations when you really need help paying off high-interest debts. For example, an auto refinance company should be willing to review your situation and offer other loan options when necessary. Many companies specialize in subprime loans, but if they aren’t willing to make it possible for you to pay back your debt, they aren’t worth doing business with.

Conclusion

According to Lantern by SoFi, “refinancing your loan will temporarily lower your credit score–usually for no longer than about one year.” However, auto loan refinancing is a great way to free up cash that’s locked into your car–and turn it into money in your pocket. And according to a study by the personal finance site Credit Karma, 60% of Americans who refinance their auto loans save money.