The basics of refinancing your car loan in the post credit crunch era

Car refinancing has become popular around the world thanks to current low interest rates, arising from the steady recovery of economies from the global credit crunch. If you bought and financed a car a few years ago, refinancing your car now means you are likely to get lower interest rates than before. However, there are some basic things you should know before refinancing your car loan if you are looking to get the right loan for you.

Car loan refinancing

Car loan refinancing entails paying off your existing car loan with the financing of another lender offering a lower annual percentage rate (APR). Benefits of refinancing your existing car loan with a loan that has better terms and lower interest rates is you are able to lower your monthly payments and complete your car loan repayment a lot quicker. The good news is that there are now more attractive car refinancing offers in the post credit crisis era than there was during the global economic crisis.

Review your current car loan documents and find a lender that can refinance you current car loan at a lower interest. The internet is a good place to start searching for a lender to refinance your car at a lower APR. While you will likely not get car loan refinancing that is more than your car’s value, car refinancing is not half as difficult or costly as refinancing a mortgage.

Phil Reed, a senior consumer advice editor at a car information website, says that contrary to what many people think the qualification criteria for car refinancing is actually much simpler than mortgage refinancing. The time and cost involved in the process are low and emphasis is placed on the applicant’s credit than on the value and balance of the car.

When to get a car loan refinance

Car loan refinancing can be good or bad for you, depending on a number of things top among them your personal circumstances. Consider getting car loan refinancing if:

1. Your loan interest rates are significantly higher than what is currently offered in the market. Interest rates have dropped since 2008.

2. Your credit score has improved since you first took out the existing car loan.

3. You have a lengthy car loan that stretches five to eight years. The longer the term of the loan, the more interest you will ultimately pay.

When not to get car loan refinance

While refinancing your existing car loan has obvious benefits, avoid refinancing your loan if refinancing the loan comes with prepayment penalties that would negate your refinancing interest savings. Some car loan terms have fees tucked in that make it financially imprudent to refinance the loan.

Also don’t refinance your car loan if refinancing will extend the life of your loan, unless you are in seriously danger of defaulting on your loan or missing your car loan repayments.

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