Your interest rate can be lowered by refinance car. Getting a lower interest rate can save you as much as $80 per month. The interest rates on your existing loan have likely lowered since you got it. It might be a great time to compare your rate if you have been keeping up with your payments.
A new car loan is usually arranged by switching lenders and replacing your current loan. Just as on your original loan, you will have to put up your car as collateral on your new loan. What you need to consider before you apply for a refinance on your auto loan.
Refinancing an auto loan has many benefits
There are different reasons for car loan refinancing. Here are three reasons that refinancing may make sense. To pay off your old auto loan, you refinance your loan with a new one with different terms. Reduce your monthly payments or reduce your interest rate by refinancing. Consider these benefits:
- If you have improved your credit score since first buying your vehicle, or if the interest rate market has declined since your first purchase, you can obtain a lower interest rate.
- A low-interest rate usually translates into a lower monthly payment if the repayment term remains the same. You may also be able to get a loan that has a longer repayment period if you want to further reduce your monthly payment. The interest might be higher, though. Although it can be expensive throughout the car loan refinancing, if your monthly budget is tight, it might be worth it.
- It is also possible to choose a shorter repayment period if you choose to pay off your debt sooner. The shorter the term, the lower the interest rate, so you’ll save more money and be able to eliminate your debt more quickly – even though it’ll cost you more per month.
- Refinance the original auto loan and get some cash out as cash-out refinance: Some lenders offer cash-out refinance loans so you can pay off other expenses with the money you receive. A lot of equity in a vehicle is usually required for this option.
If I refinance with Capital One, will my GAP policy remain in effect?
By refinancing, you will only have your existing auto loan paid off, and no new GAP coverage will be financed to cover coverage that was canceled. Check your GAP agreement or contact your GAP provider to find out if your policy terminates on refinancing.