Ready to hit the road to better savings and smoother finances? Buckle up because we’re going to take you through the ins and outs of refinancing your car loan. Whether you’re wondering how it actually works or deciding if it’s right for you, Rapid Loans has got you covered.
What Does Refinancing A Car Loan Mean?
So, what does it mean to refinance your car loan? Simply put, refinancing your vehicle loan means replacing your existing loan with a new one that has better terms. Think of it like trading in your old vehicle for one with that new car smell.
You’ll find that this new loan typically comes with a lower interest rate or a different loan term. This should make your monthly payments more manageable and potentially save you money in the long run. Everybody wins!
How Does Car Loan Refinancing Work?
Inquisitive about how refinancing a car loan actually works? When you refinance your car loan, you borrow money from a new lender to pay off your current car loan lender. It’s really as easy as it sounds!
Before you make any smooth moves, it’s best practice to evaluate your current loan by checking the interest rate, monthly payment and remaining balance. You’ll also want to shop around for a lender that offers better terms so don’t be shy about making comparisons.
Once you find a lender you like, you can submit your application and they’ll review your credit score, vehicle details and current loan terms. You then repay your new lender over time according to the terms of the new loan contract. With potentially lower monthly payments or a shorter loan term, you can enjoy that Sunday drive without money on your mind!
What are the pros and cons of refinancing your car loan?
We love a pros and cons list as much as the next person, so how does it stack up when it comes to refinancing your car loan?
Here are a few benefits of refinancing:
- Lower Interest Rates: If interest rates have dropped since you took out your original loan, refinancing could reduce your monthly payments. This is your chance to lock in a lower interest rate than your current loan, potentially reducing your repayments and saving money over the life of the loan. All we’re hearing is that this leaves more money in your pocket which gets the green light from us!
- Reduced Monthly Payments: Refinancing can extend your loan term, lowering your monthly payments and freeing up cash for other expenses. This means you’ll have better financial management because it can make budgeting easier.
- Improved Credit Score: If your credit score has improved, you might qualify for better terms than you did originally.
- Flexible Loan Terms: Refinancing can adjust your loan term to better fit your financial situation, whether you want to pay off your car sooner or extend the payments.
- Joint Borrowers: This is your chance to add or remove a joint borrower if your circumstances have changed.
Every financial move has its ups and downs so here are a few downsides of refinancing:
- Extended Loan Term: If you extend the loan term to reduce monthly repayments, you may end up paying more in interest over a longer period.
- Fees and Penalties: Some lenders charge fees for refinancing so you might come across costly surprises such as potential entry and exit fees.
- Credit Impact: A hard inquiry on your credit report could temporarily lower your score.
- Reduced Borrowing Power: You may not be able to borrow as much as you did originally due to changes in lending criteria or credit policies.
When Should I Consider Refinancing my car loan?
Timing is everything, right? Here are a few scenarios when refinancing a car loan might be a smart move:
- Interest Rates Drop: If interest rates have decreased since you took out your original loan.
- Credit Score Improvement: If your credit score has significantly improved, you might qualify for a better rate.
- Financial Changes: If your financial situation has changed and you need to lower your monthly payments.
- Better Loan Offers: If you’ve found a lender offering better terms than your current loan.
Our dedicated finance professionals are waiting on the other end of the phone to support you with refinancing your car loan to get you the deal that suits your individual circumstances – or simply apply online in just a few minutes!