When you can replace your existing loan at a lower rate, it’s best to refinance as early as possible.
Most auto loans are amortizing loans, which means you pay a fixed monthly payment with interest costs built into the payment.
Is it a good idea to refinance a car?
When It’s a Good Idea to Refinance
There are several situations in which it may be beneficial to refinance your car loan. One is if you’re trying to take advantage of lower interest rates. Doing so will lower your payment, but most importantly, it will decrease the amount of interest you have to pay on the loan.
How does it work to refinance a car?
Refinancing a car loan involves taking on a new loan to pay off the balance of your existing car loan. People generally refinance their auto loans to save money, as refinancing could score you a lower interest rate. As a result, it could decrease your monthly payments and free up cash for other financial obligations.
What are the pros and cons of refinancing your car?
Pros of refinancing a car loan
- Lower interest rates. Most people are drawn to the appeal of lower rates which reduce interest expenses and the total cost of the loan.
- Reduce payments and extend your loan.
- Improved cash flow.
- A more accessible lender.
- Higher interest rates.
- Larger interest costs.
- Refinancing fees.