Sometimes, it's good to have more cash flow in a budget. If this sounds like something you need, you might consider a refinance car loan as a solution. You have probably heard of refinancing in terms of home mortgages or home loans. In the home buying sector, refinance home loans involve getting financing for an existing loan by applying for a second loan that has a lower interest rate.
The process for car loan refinancing is similar, and it provides a way to pay off one loan using money obtained by taking out a second loan. This all sounds simple, but refinancing is more complicated in actual practice. It is important to remember that refinancing is only a good idea if the interest rates on a new loan are lower than what you are already paying.
If the interest on a new loan is higher than a current loan, it is better to pay off the original loan instead of spending money on new loan payments. Your goal in refinancing a car loan is to save the money that would have been spent on the loan with the higher interest rate. Refinance car loans represent one of the major secrets of the auto finance industry. Home loan refinancing has become commonplace, but only a few automobile owners go the refinancing route.
One reason for this could be that many car owners have bad credit. However, bad credit is an even better reason for you to consider a refinance car loan. Refinance loans for automobiles operate in the same way as refinancing a mortgage. With a refinance car loan, you pay off your current loan, saving a considerable amount of money on the monthly payments. Monthly payments are reduced when you refinance a car loan at a lower interest rate.
Additionally, you will see your monthly savings rise. Refinancing a car loan could also mean that you can pay off your loan principal more quickly and save on interest charges in this way as well. If you are a car buyer who has bad credit, you can get a refinance car loan in order to reduce the APR. Even if you have bad credit, you may still be able to get a loan with interest rates that are lower than the typically twenty-one percent to twenty-five percent APR.
For example, you get a refinance car loan for $16,500 on a new car and agree to pay off this amount at the end of sixty months at twenty-one percent APR. You begin paying off the loan for several months, and then you decide to refinance the car loan with another lender at six percent APR. Your current loan requires a monthly payment of $446, but the payment on the new loan is about $319. The total in interest paid on the current loan at the end of the loan period would total about $10,283. With a refinanced loan, you could save about $7,600 of that amount, having a total interest charge of only $2,639. So you can see that refinancing may be a good option if you have an auotmobile loan with high interest charges.
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