When Is the Best Time to Refinance Your Car Loan?

Saving money on transportation expenses can be difficult, especially if, like many people, you have a loan on your car. Most people look at the payment for this loan as a fixed expense, but making a payment every month on a vehicle that has become too expensive can ruin a person or family’s budget. Fortunately, it is possible to find auto refinance loans, making it easier for a person to make their whole payment on time every month.

Most auto loans can take years for a person to pay off in full. Often, a consumer takes out a loan for a car right after he or she has landed a good job and/or has few other financial obligations. Over time, however, some of these loans become more of a burden to a consumer, especially as a person goes through financial rough patches. For consumers in this situation, it may be a good time to consider auto refinance loans.

In fact, auto refinance loans are a good idea for anyone who needs to either reduce their monthly payment, or anyone who wants to pay off their debt faster while still making the same monthly payment. Currently, auto loan refinance rates are at their lowest rates in years. Many consumers have found that the current interest rates are less than the refinance interest rates that were available from most banks as little as six months ago.

In general, refinancing saves you money in two ways. First, a refinanced loan usually comes with a lower interest rate. This alone can save consumer money every month by reducing the total amount of interest that he or she would otherwise pay. For a consumer who just needs some breathing room in his or her budget, this is an easy way to lower their car payment. A consumer who wants to get out of debt quicker can apply the money he or she is saving on interest every month towards additional payments on the principle of the loan.

Secondly, a refinance can stretch out the payment term of a loan. For example, a loan with 36 months of payments left on it can refinance into a new sixty month loan. By having more time to pay off the loan, the amount of principle that a person needs to pay every month will be reduced. Of course, this will probably want to make a person hold on to their car longer before trading it in for a new one, but only if the consumer chooses not to make any additional payments towards the principle. In fact, many people choose to stretch out their loan payments just to get them through a temporary cash flow problem, and then resume making additional principle payments once the issue is resolved.

 

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