Car Loan Refinancing

We all consider refinancing our mortgage, consolidating credit card debt, and other methods of profiting from lower interest rates, but have you considered refinancing your car loan?

Refinancing your auto loan is easier than refinancing your mortgage. Instead of the need for an appraisal, lenders use Kelly Blue Book to appraise the value of your car.

There are several options to choose from when deciding where to find a lender to refinance your auto loan. Most companies that do mortgage refinancing also do car loan refinancing. Credit Unions do more refinancing of car loans than anyone else, so they are a good place to start. Compare companies using your favorite search engine or go to bankrate.com and use their search engine.

Often, you can find companies that have no fee at all, whereas some have a small application fee. You may also have to obtain a new car title. See your state motor vehicles department for the fees associated with that.

Right now new car loans have an average interest rate of less than 8% nationwide. If your current loan has a smaller interest rate than that, of course you don't want to refinance at this time. Watch for interest rates to fall below the interest rate you got for your current loan and act then.

When you do refinance, remember that the interest rates for a used car loan applies and that rate is usually a little higher than the interest rate on a new car loan. Right now the average rate on a used car loan is about 8 1/2 percent.

How do I know refinancing my auto loan is a good idea?

If your credit score has improved. If you had bad credit when you took out your car loan, but since then your credit score has improved, then you might want to consider refinancing. If your loan was at a high interest rate due to poor or nonexistent credit, but after making payments or doing other things to improve your credit score, refinancing your car loan at 9 1/2 percent could save you a lot of money over the life of your loan.

When the amount you owe is still a very substantial amount of the original loan. Your car needs to be less than 5 years old and only consider refinancing your car loan if you still owe more than $7500. They use your car for collateral, so lenders won't underwrite a loan that is not worth the amount you still owe.

If you are short of cash. Refinancing your car loan into a longer term loan and a lower rate can lower your monthly payments by a significant amount, giving you the cash you need to keep up with other bills you may have.

As stated above, there are many reasons for refinancing your loan. There are also many options as far as where you get your new loan. Our best advice to you is to shop around and get the best rate possible for your new car loan, because you may not want to do it again for the life of the loan. Many people take out 2nd and 3rd mortgages on a home. We do not consider refinancing your car loan several times a good option.

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