How soon can you refinance an automobile after it has been purchased?
The interest rate on a loan you have taken out to purchase a new or used vehicle suddenly goes up. Maybe you’ve realized you cannot afford the monthly payment.
Auto refinance your loan at a lower rate and/or for a longer time. This can save you money as well as reduce your monthly payments. However, it could increase your debt by increasing your loan term. There are special considerations that should be taken into account when refinancing a loan.
Understanding how to finance your car
Refinancing a car requires you to take out a second loan in order to repay the original one. The new loan could be for the entire term of your existing loan or just for part of it. But in most cases, it’s a better option to extend the time required to repay the loan. Consider that refinancing may result in savings of up to 50% if the loan term is extended. Refinancing, depending upon your decision, can save you a lot.
Refinancing the car loan is simpler and faster than refinancing the mortgage. None of our lenders charged fees. However, your state may impose a small fee for title transfer.
Is it wise to refinance early on a car loan?
Here are some reasons refinancing early may make sense.
Your current loan got a terrible deal
This can happen when you finance your car through a dealership without doing enough research. Dealership financing is usually provided by banks, independent lenders, captive financial institutions, and car manufacturers. Dealers can sometimes conceal the best rates of these lenders and quietly mark them down to increase their profits. You can avoid this by getting a preapproved car mortgage before visiting the dealership.
Your credit score is improving
Even if you have not been in credit for 12 months, your credit score could have increased enough to be eligible for a substantially lower rate. Maybe you fixed a mistake on the credit report or paid off the most outstanding debt. Perhaps you’ve shown your commitment by paying your bills in time. An improved credit score is a great way to secure a better deal on a loan.
You’ve built a relationship and trust with a lender
Some institutions offer low rates for customers or members. Some institutions offer special rates to attract new borrowers. For vehicles that are relatively new, lenders may offer a refinance at their attractive new rate for existing loans. These rates might be more attractive than the ones you were offered when you first applied for a car loan. It pays to review your loan, and your payments regularly to make sure that you are receiving the best rate.
You can’t afford your car loan payments
Refinance typically allows for the extension of the loan beyond the original due date. Along with any reductions in your rate, this can reduce your monthly expenses. Longer terms will eat away some if not all, the savings of a lower rate refinance. As an option, you might consider -cashing-out refinancing. A lender will refinance a loan and give cash up the difference between your vehicle’s price and the amount you owe. But this borrowing is very risky, especially when you are already in a pinch.