If you’re feeling tied down by your car loan, there are options available to help lower your monthly payments and interest rate, which can save you a lot of money in the long run. However, it’s essential to understand how refinancing your auto loan works and if refinancing is right for your situation.
The Basics of Car Loan Refinancing
Before heading to your nearest financial institution for car loan refinancing, you need to know what refinancing your car loan entails. Refinancing your car loan means replacing your existing loan with a new one. Sometimes you can refinance with your current lender or opt for a new bank or lender altogether. The primary reason for refinancing your car loan should be to help you financially, either long or short term.
Refinancing an auto loan is not for everyone, but there are several benefits of refinancing that you may not have considered. Here are some benefits of refinancing your car loan that might surprise you.
Pay Your Loan Faster
Let’s say you decide to refinance your car loan for a shorter term with higher monthly payments. While this may seem counterproductive financially, it’s actually an excellent way to pay off your loan sooner and save money in the long run.
A vehicle refinance calculator is a perfect tool to help you figure out your monthly payment amount, interest rates, and how much money you can save with a new loan.
Get a Lower Interest Rate
Lowering your interest rate with a refinanced car loan can reduce your monthly payment amount and total interest charges. It’s a two-fold win for your budget. “According to Lantern by SoFi, “People are often tempted by auto refinance rates—and with good reason. A lower car refinance rate can save significant interest paid with the right terms and loan amount.
If lowering your monthly payments and interest rates is your goal, begin with a vehicle refinance calculator with your current monthly payment, the balance left on your loan, and the current interest rate. After you input your current loan information, you can input potential new interest rates and loan terms to find a loan that suits your needs. Lantern by SoFi and other online financial institutions offer refinance calculators to help you find the best loan terms for your situation.
Lower Your Monthly Payments
If you find yourself struggling each month to pay your loan or other bills, lowering the amount of your monthly car payment is an ideal way to get control of your finances without losing your vehicle. By extending the loan term, you can lower your monthly payments. However, extending your loan term can increase the amount you’ll pay in interest charges, but it’s a good solution for saving money each month. In addition, you can always pay additional money each month once your financial situation improves, which will lower your additional interest charges.
Whether you’re having some financial challenges or looking to pay off your auto loan sooner, or simply looking to save some money, refinancing your car loan may be the right solution.