Auto or car loan refinancing refers to the process of paying off an existing car loan with a new loan that is usually granted by a new lender. Different car owners apply for this type of loan for different reasons and intentions. If you want to have your car loan refinanced, you should clearly understand your goal and the outcome you want.
The most common reason why people apply for refinancing is to save money. But there are a lot of ways one can save money through it. Some use it to reduce monthly payments while others see this as a way to lower interest rates or make adjustments on the term length of an existing loan. Whatever prompts you to refinance your car, it is important for you to have a clear understanding of its possible outcome.
Reduce Monthly Payments
A majority of car owners who seek refinancing want to reduce their monthly payments. People whose monthly household budget is affected by their monthly loan amortization are the most common applicants for car refinancing.
There are two ways to lower the monthly payments for your car loan. You can get it either by reducing your interest rate or by extending your loan term. The most common approach for lowering car loan payments is by extending the number of months required to have it paid fully. This can reduce your monthly burden as a payer. However, if you sum up all your monthly installments, you could end up paying more than you would without changing the loan terms. If you can convince your lender to lower your interest rate without extending your loan term, the total value you have to pay for your car will definitely reduce.
Reduce Interest Rates
Most customers apply for car loan refinancing to pay off an existing loan and get a new lone with lower interest rates. This can be a sound option because if the lenders find them credit worthy, they will be granted a new loan with lower interest rates which can translate into a reduced total cost assuming that the lender hasn’t extended the loan term by many months.
Add or Remove Someone as Co-Signer
Some car loan beneficiaries apply for auto refinancing just for the sake of having someone added or removed as co-signer to the loan. If you wish to add or remove someone from your car loan, applying for a car loan refinancing would be one of your best options. This is a process that allows you to get a new loan together with a new contract which could make life easier for you.
Lori is a corporate consultant whose experience and area of expertise are on fund administration, debt collection, wealth management and personnel administration. He likes to share his insights about business corporate solutions, sustainability & management, and a lot of human interest stories including health, wellness and self-improvement .