Refinance a Car Loan

Refinance a car loan

If you have an existing auto loan with high payments and/or a high-interest rate, refinancing may help reduce your budget strain. Many car owners choose refinancing as a way to get a lower rate and save money every month. But did you know you can also tap into your car’s equity to access some extra cash as well?

Simply put, refinancing means taking out a new loan to pay off the balance on your current loan. For example, if you still owe $8,000 on your existing loan, you could accept a new $8,000 loan with a more favorable rate and extend the length of the repayment term to lower your monthly payment. You can also choose to continue making your current payment (same amount) and pay the debt off sooner to save in the long run. Interest rates fluctuate regularly and may be lower now than they were at the time you first financed your vehicle. Or, if your credit situation has improved since you bought your car, you may now qualify for a better rate. Either way, if your existing loan terms are not the best, a refinance could be a remedy.

Some things to consider before refinancing:

• Check your credit score — Before looking for a new loan, be sure to review your credit score and credit report to better your chances of getting a good rate. You can get yours for free at annualcreditreport.com.

• Requirement from potential lenders — Be sure you know what potential lenders require for an auto loan. For instance, many lenders require that a car be under 10 years old and have less than a certain number of miles accrued.

• Be aware of fees involved — Your previous lender may charge a prepayment penalty if you pay off your loan early, and a new lender could charge an origination or processing fee for a new loan. Make sure you factor this in when calculating your potential savings.

• Calculate the total cost of the loan — Even if you save on your monthly payment, extending your loan term may result in you paying more over the life of an extended loan. You will have to weigh the benefits against the potentially higher cost.

If the value of your car is greater than what you still owe on it, you may have the opportunity to access that positive equity. Some lenders like Lendmark Financial offer cash-out options that let you refinance your car and get some cash to pay for other expenses. You could qualify for a loan that is more than what you need to pay off your existing balance and pocket the difference. To get started, visit our Auto Equity Loan online application.