What is Auto Loan Refinancing and When Should You Take It?
Auto Loan Refinancing is known to reduce the overall interest rates by almost 2.4%. To put that into perspective, that is nearly a $50 reduction in your net monthly credit payments, $600 in an entire year, and almost $3,000 in 5 years – the typical span for which consumers take auto loans. Yet, almost 50% of all car buyers do not go for auto loan refinancing even when they know that the option is available, and the benefits are better. Mortgages see a higher rate of applications than auto loans. So, what is it and when should you consider it? Let us find out.
What is Auto Loan Refinancing?
Similar to housing loan refinancing, auto loan refinancing is where you take a new loan with another lender to pay off your current credit and continue the monthly payments with the new lender. Most reputed buy here pay here in Spartanburg, SC, provide refinancing options to their customers as auto financing is an integral part of their entire business model. Typically, you will be offered a competitive interest rate, flexible loan terms, and other incentives to encourage you to refinance with them.
When should you refinance your auto loan?
The deal is better
If you previously bought your car from a dealership selling cheap used cars in Spartanburg, SC, but settled for a high interest rate, then it is a money-saving tactic to move your loan out to another dealer offering lower rates. Certainly, the better deal is enticing as you get to move past the high rate that you had previously agreed to for some reason.
Stretch or shrink your loan span
Say you bought a used car from a buy here pay here in Spartanburg with 500 down and took the loan for a short span. The interest rate was low in this case but the high credit amount might be taxing your monthly budget. You can refinance your auto loan here to stretch the span, which will reduce your monthly payments, or shrink if you can afford to pay more.
Your credit score has improved
It might also happen that your credit score has moved from bad to subprime owing to your timely credit payments for a year. That should slash your interest rate by almost 10%. You must refinance your auto loan here to take credit with your new score and reduce your overall payments with the benefits now available.
Plus, you can also find out later that one dealership is better than the one you bought your car. To take advantage of the former’s incentives on used cars for sale in Spartanburg, SC, in the future, you might consider auto loan refinancing. Either way, the concept makes sense as you stand to win at the end. Do your research and take appropriate action.