Have you been struggling to stay on top of your auto loan payments due to recent financial hardship? There are a number of options to stay on top of your obligations. One is to refinance your car, which could involve extending your loan terms to lower monthly payments. The car’s title may need to be transferred from one creditor to a different one, or your current creditor may be willing to work on issuing a new loan. However, refinancing isn’t always the best way to make payments more affordable, as you could end up paying far more in interest despite lower monthly payments. It’s worth exploring both the pros and cons of refinancing to determine whether it could work for you.
When to Refinance
There are a few situations when it makes sense to refinance, even if you don’t have any problems meeting your current obligations. For example, if you were drawn into purchasing a car due to Volkswagen deals at Carsales but had poor credit at the time, you could qualify for better interest rates now if your credit score has improved. This could save you money in the long run. If rates have taken a dive since you initially purchased your car, it is also in your best interest to refinance and take advantage of these. A general rule is that if you can save at least 1 percentage point in interest by refinancing, it may be worthwhile because it will allow you to pay off your loan faster.
Another benefit of refinancing is that it allows you to access more money, provided that you currently owe less than your vehicle’s market value. For example, if your vehicle is currently worth $10,000 and you only owe $6,000, you could potentially refinance to $7000. You’d be able to access that $1000 for home repairs or other immediate needs, while still owing less than what your car is worth. On the other hand, if you have just lost your job or face unexpected expenses, you may need to lower your monthly outgoings at any cost. In this case, refinancing allows you to extend your loan so that your monthly payments are lower. Although you’ll pay more in the long run, you could avoid losing your car.
The Downside of Refinancing
There are certain situations in which it makes sense to refinance a car, but there are also disadvantages to be aware of. One potential pitfall is that you could pay more in interest. This can happen even if you refinance to a lower interest rate, if you extend the loan to save money on monthly payments. Always run the figures carefully to determine that you’re really saving money over time. On the other hand, if you refinance an older car you may also be hit with higher interest rates. This can be worth it if you need access to fast cash through refinancing, but it’s definitely a pitfall to consider.
There are pros and cons to refinancing. To obtain the most favourable rates, it’s important to shop around. You can search online to compare interest rates, terms, and conditions, or contact lenders directly for quotes.