The idea behind car loan refinancing is quite simple. You basically take a new loan to pay off the current balance on your existing car loan. If your current car loan has a high-interest rate or you find your monthly payments unaffordable, you can apply for refinancing to find favorable terms.
If you find yourself asking, “will refinancing my car lower my payments” read on to learn more about it.
Refinancing your car loan lowers your monthly payments as it increases the length of your repayment term. It can also help you save some money by getting a lower interest rate. As a result, you can save thousands of dollars over the period of your loan term. And if you are lucky and have a great credit score, you can get an even better interest rate that will prove your decision to refinance to be worthwhile.
Depending on your original loan terms, refinancing your car loan can help you save money on interest and also lower your monthly payments or both. Below are some situations where applying for an auto refinance makes sense:
- When your car loan was financed by a car dealer: If your car loan is financed by a car dealer, they add their commission as part of the loan. So if that’s the case, there is a great chance that you didn’t get the best interest rate you could. Therefore, applying for auto refinancing may get you better rates.
- When your credit score has improved: If your credit score is better than what it was when you got the original loan, then applying for auto refinancing would get you a much better interest rate. A mere difference of 30 points can make a huge difference in terms of the interest rate you get.
- When you need a lower monthly payment: If you want to get lower monthly payments on your loan term, you can apply for auto refinancing to get your monthly rate reduced.
Auto refinancing is a great idea if you are looking to get lower monthly payments and better interest rates. So, to answer your question, “will refinancing my car lower my payments?” yes, it would. If you have a good credit score, pay your monthly payments on time, and your car is of a newer model, you can refinance your auto loan to get lower monthly payments.