Quit Setting Your Money On Fire

Should You Refinance Your Auto Loan

by Kathryn Watson

When you have an auto loan, you may want to be able to refinance it. You may want to have lower monthly payments or to take advantage of a better interest rate. Refinancing your auto loan shouldn't hurt your credit rating in the long run. You may take a slight hit right after you do it but then rebound back to normal. Paying off your loan will also help to boost your credit rating, so overall, refinancing may be a good thing for you. 

When to Refinance

The most important thing about refinancing your car is knowing when to do it. If your payments are too much or you can get a better interest rate, you should consider refinancing. The best variable as to whether or not you should refinance is if you will save money. If you aren't saving money, don't refinance right now. The goal of refinancing your auto loan is to save money on payments. 

Payoff Rate

You need to check your current loan if now is the time to do it. You are looking for a few things. One is that you are looking for your current payoff amount. That's the total amount it would cost you to pay the loan today. You are also looking for your current interest rate. Find an online interest rate calculator if it doesn't say on your loan papers. Working with the amount you have paid, the amount still left, and the term of your loan, you should be able to figure out your interest rate. That same tool can help you figure out new loan amounts and payments. 

Car Value

Knowing your car's value can also help determine if you should refinance. Some sites can help you value your vehicle. If your loan amount is higher than what your car is worth, refinancing isn't always a good idea. As you pay your loan, the interest you are paying lessens, and you are paying more of the principal. This matters because if your loan is nearing the end, you are paying more principal than interest, and refinancing isn't going to do much for you, whether your car is worth more than what is left on your loan or not.

Refinancing your car loan is one way to make your money last longer. Knowing if refinancing is the right thing for you to do can be very helpful for you. Reach out to an auto loan refinance service to learn more.