Will the interest rate of my car loan go down?

When you are currently stuck in an expensive car loan that would take a few more years to be paid off, you might probably ask yourself “Will the interest rate of my car loan go down?” Given the question that you might ask, this article helps you explore the realities of a car loan interest rate once you already obtained the loan.

Will the interest rate decrease?

The interest rate involved in a loan would not go down as soon as the agreement between the loan provider and the creditor has been signed. The interest rate tied to the loan will not decrease since lenders would not allow their profits to reduce.  Lenders earn their profits from the interest rate they charge to creditors for the amount they borrow. However, there are other ways to reduce the interest once you know how to deal with lenders.

How to reduce the interest rate?

The best way to obtain a lower interest rate for a car loan is by obtaining a refinance loan. Refinancing is accomplished by searching for a second lender that would provide the amount you need to pay of the first loan. Once you are able to pay the first loan’s remaining balance using the money from the second lender, you don’t need to pay the monthly premiums to the first lender since you already pay the first loan off.

Once you refinanced a car with the amount from the second lender, your obligation to pay is transferred to this lender. Since the amount you owe the second lender is much smaller compared to the previous loan, the interest rate would probably reduce. In addition to this, the loan term would also be extended since a refinancing loan is a brand new loan with a new contract.

A refinancing loan however is not offered to almost every creditor. In order to obtain a refinance loan, you need to possess an excellent credit score. Given this requirement, you need to pay the monthly premiums of the first loan faithfully no matter how large the amount is. This would improve your credit score and make you qualify for refinancing loans offered by lenders.

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