Refinancing means replacing an existing loan with a new loan. The most common consumer refinancing is for a home mortgage but few people know that refinancing an auto loan is much easier.
People choose to refinance for different reasons, for example to get advantage of falling interest rates (by refinancing at a lower rate), or to reduce their monthly payments by taking a longer-term loan. If you choose to refinance you may save some serious money especially if your existing loan was based on unfavorable rates.
Applying for refinancing your auto loan could be very easy on the Internet, it can take you 10 minutes to fill out the application and you can compare the different rates and conditions to choose the most competitive offer. It is also possible that no points are charged for the refinance process so you donít risk anything to apply (but make sure you check that).
You may want to keep an eye on the Fed to follow the interest rates because when they drop, the loan rates are likely to follow and you might be able to get a cheaper loan especially if your credit score has improved since you took your original loan.
It is sometimes a good move to shop for a new loan even if the interest rates have not moved much. You may not be very happy with your existing rate and some extra efforts can help you feel better about your monthly payments if you are able to reduce them.
Sometimes your financial picture may have changed, for example, you may have bought a new house, and your monthly expenses have risen considerably. In this case, you may reduce your auto loan payments by taking a longer term loan and thus spreading the payments out over a longer period of time.
It is always advisable to consult an expert when considering refinancing.