With interest rates at record lows, many people have turned to a mortgage refinance in an attempt to secure lower rates and save money over the life of their loans. However, what many fail to realise is that car loans can also be refinanced; and the process is both easier and quicker than for a home mortgage. The five tips below will help you decide whether refinancing your car loan is the right move for you, and how to go about doing so.
1. Understand your current loan
Before proceeding with a car loan refinance, it is important to be clear about how much you still owe on your current loan, the loan term and the interest rates you are currently paying. You should not refinance for more than the amount you currently owe, nor should you do so if the loan term is nearing the end as you are likely to increase your costs by extending the term. Moreover, if your current loan involves hefty pre-payment penalties, consider whether the savings from refinancing will cover those costs.
2. Know your credit
Knowing your credit will help you obtain the fairest rates possible, allowing you to avoid being duped by resolute salesmen. If your credit score has improved since you took out your original loan, refinancing could be truly beneficial. On the other hand, if your credit has worsened, it is worth considering whether refinancing is the best option.
3. Shop around
As with almost everything, shopping around is essential for finding the best deal available. Make sure you get quotes from multiple lenders, using free online services where possible, in order to compare rates, terms and conditions and select the most advantageous deal.
4. Look beyond low interest rates
Low interest rates can be particularly alluring for those seeking to save during an otherwise challenging financial period. Though low rates may save you money, do not overlook other important factors that will affect how much you pay overall. Transfer costs, processing fees and pre-payment conditions will eat into your savings if you have not taken them into account. In short: read the fine print.
6. Calculate your savings
Once armed with information regarding your previous loan and having identified the best refinancing deal available, take the time to do the maths. There are several car loan calculators available online, which can be used to check that refinancing will truly save you money.
Car loan refinancing can be an excellent way of saving money, particularly if your credit score has improved and interest rates haven fallen. It is however worth taking the time to calculate your potential savings and expenses accurately, while always keeping an eye on the small print. If you are just about to buy a car, check this useful page to find great deals on second-hand Chevrolet cars.