The 2019 Refinancing Checklist: Here’s How to Know Whether or Not to Refinance Your Car Loan!
If you were walking in the park and stumbled upon a $100 bill, there’s no question you would pick it up and quickly stash it in your pocket, right?
If that’s the case, then why do so many RV and car owners squander the chance to pocket some extra money by refinancing their car loans at a lower cost?
Hmm, let that simmer….
Indeed, many lenders, banks, and credit unions compete fiercely to have customers’ vehicle loans by providing refinancing deals that almost cost you, not even a penny! There are even some lenders who return your cash back, based on your refinanced loan percentage, as well as other notable incentives.
In fact, as soon as you refinance, the lender in question will write a check to clear off your previous loan albeit at a lower percentage rate. After this, you can commence making payments to the new lender.
Additionally, the title of the car is now transferred to the new lender from the old one. Indeed, compared to the lengthy process that you initially went through to get your old car loan, this is a much simpler process.
Moreover, refinancing does not need an appraisal and there are almost no fees. What’s even better is that you can get refinancing through an online application! With this in mind, here are four reasons to refinance today!
To Reduce Your Monthly Payments
Bills, bills, and more bills! *Sigh*, this can be a headache for the average Joe working a 9 to 5.
One of the major benefits of refinancing is that it can free up a few hundred bucks a month, which can then be directed to other essentials such as saving up for retirement, doing some extra grocery shopping, or even refurbishing that kitchen!
Interest Rates Are Comparatively Lower
Another major benefit of refinancing is that it the new lender advertises rates that are much lower than those you were initially paying.
For example, suppose that your previous rate was 7% interest.
Now, a new lender comes along and gives you the refinancing option at 4% interest. Won’t it better to snatch this option and save some extra money for a rainy day?
Indeed, director at STCU for consumer lending, Rich Lentz, encourages financing stating that it is so simple that lowering the percentage interest is usually worth it.
You Have a Great Credit Score
If you had no previous qualms with regard to your credit history and there were no discrepancies on your credit report when you got the loan, perhaps your previous lender might have hiked your rate.
Fortunately, due to your great credit score, the new lender might charge you at a lower rate when refinancing.
To Shorten the Length at Which You Are Repaying the Car Loan
So you’ve been doing a good job at work and recently got a promotion. That’s great!
Indeed, one of the things you’ll be looking forward to is completing that dreaded car loan as soon as possible. So, you might choose to refinance your loan for a shorter term thanks to the extra income coming from your new job position.
Yes, you’ll be paying much higher rates, but you’ll clear the loan much sooner.
When Not to Refinance
That being said, there are certain situations where your financial advisor will warn you against refinancing. Some of them include:
When you have an ‘upside down’ loan– Lenders normally avoid refinancing a car loan when the vehicle is worth less than what the loan is. When your vehicle has seen better days- Yep, you’ve had your vehicle for a couple of years now and that old rascal has taken quite the beating.
In such a circumstance, to protect their interests, lenders might incorporate a higher interest to refinance your old RV or car. Your loan constitutes a repayment penalty- Though extremely rare, penalties for vehicle loans can be detrimental to the individual financially and could even drain all his or her finances!
That being said, some lenders slap a refinancing fee on your current loans, so you are advised to check it out before selecting the option of refinancing.
Extending the period of the loan- Indeed, if you were scheduled to pay off your current loan in a time frame of 36 months, choosing the option to refinance for 60 months could result in you paying more.
Yes, your monthly payments might be reduced significantly, but when the total interest charges are stacked up, you’ll find that you paid a much higher interest!
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