You may have considered refinancing your home mortgage loan to take advantage of falling interest rates, but you may not have thought about doing the same with your auto loan. In some cases, refinancing your car loan can also be beneficial, resulting in a substantial savings in the long run.
Significance
According to Edmunds.com, refinancing at the right time can possibly save you thousands of dollars in interest charges. It is also easier to accomplish than other types of refinancing such as for home loans, as there is usually less "red tape" for the borrower to deal with. In some cases, a refinance application can be completed in as little as 10 minutes.
Considerations
Factors to consider when deciding whether refinancing is a smart move include whether there has been a drop interest rates from the time when your purchased the vehicle or discovering that you could have obtained a lower interest rate for your newly purchased vehicle from a lender other than the one provided by the dealership. If you are about to make a major purchase like buying a home, refinancing your auto loan may also help you lower your monthly payments, easing your financial burden.
Time Frame
Generally, the less the time that has passed since you took out your initial loan, the more you may be able to benefit from refinancing. The longer the time period that you are paying the lower interest rate, the more money you may be able to save in the long run.
Warning
There are some factors that could reduce the benefits of refinancing your auto loan. For example, it is possible that the terms of your original loan may include a prepayment fee for paying the loan off early, such as when you refinance to another loan. In this case, you would need to weigh the amount of the penalty versus what you would save with the new loan to determine if refinancing is worthwhile.
Process
When seeking quotes to help you make your refinancing decision, it is a good idea to check with several lenders. According to Edmunds.com, the Bankrate.com website offers a service that will match your loan application with a number of suitable lenders, which can save you time and effort in your search.
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