If you time it right, refinancing a car can either lower your monthly payment or save you money, or both. But, there are also instances when it's not a good idea to consider refinancing an auto loan.
Car refinancing is paying off an existing auto loan and opening a new loan using the same vehicle as collateral. The result is a new car loan on your vehicle, usually with a different lender.
When Refinancing is a Good Idea
Have you checked your FICO credit score recently? Has it gone up? If you opened an auto loan with bad credit and two or three years have passed, you might want to consider refinancing. The reason why? You could get a lower interest rate.
The average interest rate for car buyers with bad credit is around 24 percent, which is pretty high. Even worse, rates are expected to increase over the next few years, meaning the overall cost to finance a vehicle is expected to go up. So, now may be the best time to consider refinancing, especially if your interest rate is around that 24 percent.
Another situation where refinancing is a good idea is if your financial status recently changed. If you changed jobs, or your monthly income decreases, you can refinance to extend your loan term. This typically lowers the monthly payment to make it more affordable, but you end paying more in interest charges in the long run.
When Refinancing is a Bad Idea
Even if your credit improves, there are a few situations where refinancing won't work in your favor, and you more than likely will get turned down. In fact, there are three main situations where a lender isn't going to refinance you:
Need a Car Loan?
If you are interested in refinancing, Auto Masters of Murfreesboro can help you get an auto loan, even if you have bad credit. When you're ready, get started by filling out our online car loan request form. Our service is free of cost and obligation, so you can let us help you with confidence.
Charles Higgins has been in the automotive industry now for over 17 years. He has built a career by helping people with unique credit situations get financing. Charles believes everyone deserves the chance to build their credit while driving a reliable vehicle. Contact Charles today for your all of your credit needs.