Paying off your car loan can take a painfully long time, and your circumstances are likely to change over the course of that time period. If you’ve found yourself in a situation where your current car loan is no longer ideal for you, consider looking into refinancing your vehicle. Refinancing a car involves taking out a second loan that’ll replace the financing terms of your first car loan. Let’s learn a bit more about how this process works and whether it may be a good choice for you.
What Are the Benefits to Refinancing a Car?
Let’s begin by taking a look at why you might want to refinance your vehicle in the first place. Generally, people look into refinancing a car because of three potential benefits:
1. Changing Duration of Your Loan Term
Depending on your financial situation, you may want to either extend or shorten the term of your car loan. Those who wish to extend their loan term often do so to decrease their monthly payments. Because you now have a longer period of time to pay off your vehicle, your monthly payments aren’t as high. However, you should be aware that it’s likely that you’ll end up paying more overall since you’ll probably be paying more in interest by the time you do pay off the vehicle.
Those who wish to shorten the term of their loan may do so in order to pay off the vehicle faster or to decrease the overall amount they pay in interest. Since you’re paying monthly interest for a shorter amount of months, you wind up saving money in the end. Shortening your loan term does mean that your monthly payments are higher, though.
2. Lower Monthly Payments
Another common reason that car buyers choose to refinance their car is if they’re able to find a lender who offers lower monthly payments. This can be done by extending the duration of the loan term (as discussed previously), by reducing the interest rate, or via a combination of the two.
3. Lower Interest Rates
You may also choose to refinance your car because you’d like a loan with a lower interest rate than your current loan. Interest rates are included in each of your monthly loan payments, so lower interest rates means saving money monthly and in the long run, provided that you don’t have to extend your loan term too much.
What’s Involved in the Refinancing Process?
When you’re looking into refinancing a car, you need to take into consideration your current and future financial situations, as well as your current loan balance, APR, and monthly payments. Shop around at various lenders to see what they each have to offer in order to decide which best fits your circumstances.
When you’ve decided on a lender, you should also be aware that refinancing a car may involve transaction fees. You may be required to pay these fees to the lender up front, or they may be calculated into your monthly loan payments.
Contact Your Local Fred Beans Dealer Today
Whether you’re looking into auto loans, or are on the hunt for the new perfect vehicle, look no further than Fred Beans of Doylestown, PA. Our friendly auto experts are standing by for your call, so contact us today to see what we can do for you!