Are you seriously thinking about applying for a car loan refinancing?
Most experts in car loans agree that when deciding to refinance a current car loan, you might just be getting the better deal. Not does it help maximize on savings, but it could lower the interest rates of current payments. However, if the idea is new to you, the thought of it can be scary. You may wonder if it is something that will be beneficial.
When deciding to refinance an existing car loan, it is important to understand the implications. At ApprovalBuddy, we make sure you know what terms are to be met. We discuss the pros and cons of car loan refinancing. We believe it is only upon considering all options will you realize that car refinancing, through our help, is the best way to go.
What is the process of refinancing?
Refinancing a car loan means putting the current car loan under another financial institution but in different terms. In practice, it means paying off a current car loan with another loan from a different lender. Such practice comes with varying outcomes for different car owners. It is best to know your motivation for refinancing as well as the outcomes intended to enjoy after. Most people consider car refinancing for one simple reason – to save money.
Four Reasons to Refinance
Not all refinancing options offer the same outcomes. It’s implications to your current financial situation depend on the purpose of the loan restructuring. Here are the top four reasons why people choose to refinance:
1. Remove someone from the loan or add someone to the loan
Usually, for very personal reasons, loan owners choose refinancing options because they want to remove someone from the original loan or add someone to it. Either way, refinancing is the best option because it allows you to add or remove someone from the original loan arrangement because refinancing means getting yourself a new loan contract to sign in. If this is the outcome you want, contact us and we will help you through the process.
2. Reduce Payments
More often than not, those seeking refinancing options aim to reduce the rate of interest of their current car loan. This is understandable as the rate of the car loan affects everything in the household including all the expenses it comes with. However, your monthly budget should not be the only reason to consider refinancing.
There are other options to choose from. Loan term can be extended meaning lower interest rates at the longer time. Usually extending loan terms help lower the monthly rates you are paying for. However, the cost of the vehicle might be higher in the long run. With the help of ApprovalBuddy, this is possible. All you need is to determine how much you can pay in a month and we’ll help work everything out.
3. Reduce Interest rates
Although most of the reasons why people opt for refinancing are related to each other, most car owners would have this outcome as a priority. Lowering the current interest rates works best for car owners. If during the course of the loan you are able to pull your credit rating up, creditors might just allow you to do car refinancing with lower interest rates. When the rates are lowered, your monthly dues are lowered as well, allowing you to put in more money to other things important. Assuming that your car loan is not extended to lower the interest rates, then having it refinanced will better help you manage your finances.
4. Refinance the balloon amount
The length of the loan can really put a good man down. When you have to pay a lender continuously for a long period of time, it can really put a dent on your monthly expenses. Sometimes, the refinancing of a car loan means that the car owner is looking for a way to shorten the terms of the loan. Refinancing the balloon amount through another loan will help the car owner achieve more financial freedom at lower interest rates at that.
How do you refinance a car?
The process of car refinancing begins with searching for a lender that offers a lower interest rate than that of the current lender. Most car owners looking at refinancing are also looking for lenders offering them a loan with fewer administrative fees or those whose payment options are easier to meet. When they find a lender that offers either or both, they are in for a lot of comfort and peace of mind knowing that they can pay off their loan at much easier ways. If done right, car refinancing can help you save on the overall cost of the vehicle in the long run.
Here are the steps you need to follow:
- First, check with your current lender if you will be charged a fee when you decide to close your loan early before its actual term ends. If you will be, it is best to factor this in before you decide if you want your car loan to be refinanced or not.
- Second, remember that you can only get the best rates when you decide to compare. Be aware of the fees and other charges that the refinancing may come with. Once you have decided that you want to take on the refinancing option, go right ahead and apply.
- Third, select the refinancing institution.
- Fourth, prepare to submit all the documents required to get the application forward.
- Fifth, pay off the previous loan and move forward.
- Lastly, close all the accounts with the previous lender to prevent you from paying off two loans at the same time.
What should you look for when it comes to car refinancing?
You are getting car refinancing because your goal is to pay less monthly and hopefully pay less in the long run as well through lower interest rates. If this is the goal, remember to look for these items on the list before you make the switch:
- Will the repayments monthly be less? This should be the first on your list. Remember that less interest does not necessarily mean less monthly premium payments. It is best to compare the rates plus the upfront fees. Make sure to compare the rates and go for the one that makes you pay less monthly at the shortest period as well.
- Lower repayments may be tempting, but don’t jump in without calculating how much you are paying for the loan in the long run. Extended payment scheme may allow you to lower monthly payments, but sometimes it could mean paying more for the vehicle. Is it worth it? Let our team at ApprovalBuddy help you decide on this.
- Does the new lower scheme allow you to pay more than you are required? If it does, then it should help you make a decision on which loan program you should go for. The other features of the loan should help make the payments easier and more convenient for you.
- Is the lender a legitimate one? There are a number of lenders in the market. Some are established ones while others are on operation despite the lack of the proper legal documents to. Only go for reputable lenders as their fees and other rates are discussed upfront.
In all this, you have ApprovalBuddy to help you. We work on your behalf to help find a match in financial institutions that offer affordable loan rates. Either you do it on your own or you work with a financial broker to help you find the best rates. The important thing to remember is to consider a variety of options and compare refinancing options before settling for one.