When you refinance a car, you are taking out a new loan to pay off the balance of your existing car loan, with a new lender on new terms. Potentially, this could lessen your financial burden.
So, whether you’re looking for a more affordable solution, lower monthly payment or a reduced interest rate, it’s important you understand the reasons for refinancing.
Will I save money if I refinance my car?
Most loans are secured by a car and paid off in fixed monthly payments over a period of time, usually a few years. A decision as big as refinancing, may depend on a number of individual factors and if done correctly, will help save you money in the long run.
Reduce interest rates charges
Refinancing could score you a lower interest rate.
As interest rates change regularly, they may have reduced since you took out your original loan. A lower interest rate means you may reduce the total interest charges you pay on your car loan.
Lower your monthly interests
Monthly car loans can take a large chunk out of your income, impacting how much you spend elsewhere. Therefore, it is understandable why you want to lower your monthly cost, especially if you’re not able to secure a lower interest rate.
When refinancing, you may be able to find a loan with a longer repayment period, meaning your monthly payments are reduced.
Although, keep in mind that paying less per month over a longer period of time can result in a higher cost overall. This is because you'll repay more interest.
Change your offer
You may have not got the best offer the first time you took out a car loan, so shopping around to find a better deal with better loan terms could be a reason you’re financing your car.
Also, your current loan could include a family member or friend, of whom you want to remove from the agreement. Refinancing is an easy way of doing this, as you will agree to a new contract. Participants can also be added on to your new loan.
When should you refinance your car?
To refinance your car, there is no minimum time you need to wait before taking out a new loan, you don’t even need to have paid your first monthly payment of your existing loan.
Each lender is different, so finding the right requirements for you can take some time.
How to refinance a car loan with bad credit
It is possible to refinance your car with bad credit, however not every lender will consider your application. No matter what your reason for refinancing may be, certain lenders specialise in refinancing cars for people who have bad credit.
When looking for a new loan with bad credit, there are certain steps you can take to improve your chances, for example, taking further steps to improve your credit score, shopping around for the best option and checking your credit reports when working with your lender.
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If you’re still unsure whether refinancing a car loan is right for you, you can talk to one of our experienced team, who would be happy to help.