One of the best ways to save money over time is taking the refinancing route on high-interest-rate loans to a lower rate. With high monthly payments being expensive, many vehicle owners can benefit from refinancing to a car loan with a longer loan term to reduce their monthly payments.
Today, we’re going to look at when you should consider refinancing your car loan and what to remember when going down this route.
What Is Car Loan Refinancing?
When you replace an existing car loan with a new one but with a different interest rate, the loans will be held against a car and then be paid off with fixed monthly payments over a specified period of time. This can take up to a couple of years.
When Is It The Best Time To Consider Refinancing Your Car Loan?
One of the things you need to consider about refinance is the interest rates. As you may know, interest rates change regularly. Therefore, you need to recognise that from the moment you took your car loan, rates may have fallen. A drop of as little as 2 or 3 percent may cause significant savings over the period of your loan.
Secondly, your finances are another important point of deliberation when considering refinancing. With an improved financial standing, lenders are more likely to look at your debt-to-income ratio to determine whether your finances are healthy enough at a lowered ratio worthy of a lower interest rate. This is when lenders, given that your debt-to-income ratio is healthy, will most likely reduce your interest rate and save you money over time.
When you’re finding it difficult to keep up with your monthly payments due to an initial lousy car loan, opting for refinancing is an excellent alternative.
When you’re on your refinancing journey, make sure that you fully understand how car loan refinances works and the estimated costs you can save under this option. Also, when applying for refinance, lenders will always look at certain factors to determine your rate, and these include your credit score and profile. And in terms of your car, they’ll look at the make, model, trim and mileage. So make sure these are suitable for a lowered interest rate.
If you’ve checked off all the boxes, aren’t entirely certain, or have questions about refinance car loans, get in touch with ZEP Finance for expert help and refinancing services.