Car loans are multiyear agreements that are more flexible than people realize. If you signed up for a car loan that had a high interest rate or you cannot make your current payments, you may want to look into refinancing your car loan.
Why Refinance?
There are many reasons why people should consider refinancing a car loan. For the young car buyer who was forced into a high interest rate when they purchased their car a few years ago, it is the chance to lower the interest rate on the loan and make the payments more affordable. If your credit was bad when you got your car loan and you had to have a co-signer and a high interest rate when you got the loan, improved credit can remove the co-signer and lower your monthly payments. If your income is reduced and you can no longer afford your car payments, refinancing is a way for you to reduce your payments.
Refinance with Your Current Lender
One of the best options you have for refinancing your car loan is through your current lender. Even if you are a few payments behind, your current lender may be interested in refinancing your auto loan to help you get caught back up on your payments. Lenders deal with refinancing auto loans everyday, and it is something that many financial institutions use to help people afford their cars rather than having the cars repossessed.
Contact a Third Party Lender
If your current lender will not help you, check with other lenders. Be sure to take notes and compare the offers you get to make sure you are getting the best possible offer. If you use the Internet to find lenders, be sure to call the lenders before you fill out any information on their website. Ask questions about their loans and feel confident that they are a reputable organization before you offer them any of your personal information.
Contact a Dealer
If you are trying to refinance a car you purchased new, contact the dealership where you purchased the vehicle to see if you can refinance there. The advantage of refinancing through dealerships is that they have relationships with lenders and get you a variety of deals to choose from. A dealer can also try to work a refinancing deal back through the manufacturer and get you a very low interest rate.
Things to Consider
In most cases, the process of refinancing a car loan extends the length of time you will be paying on the car. If you have paid two years on five-year loan and then refinance with another five year loan at a lower interest rate, your monthly payments will drop because you are financing less money at a lower interest rate but you will be paying for the car for seven years instead of five. If you are refinancing an older car, you may want to get an opinion from a certified mechanic as to whether or not the car will outlive a loan extension.
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