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The Best Reason To Refinance

The auto loan you take out is not a sentence. You should always verify that the amount you borrowed to purchase a vehicle is not excessive. The following are benefits of refinancing

Pay Less Interest

A primary reason to refinance is to be able to borrow at lower interest rates. The lower interest rate, provided all other factors are equal means that your monthly payment will be less after you have considered all your borrowing costs. The interest rate is also part of your monthly payments so your monthly payment should also drop. It is now easier to manage your monthly cash flow.

It’s a good idea to refinance early if you can get a loan that is lower than your current one. A majority of auto loans are revolving loans. This means you will pay a fixed monthly fee with interest charges.

You will pay down your debt over time. However, you still have to pay the principal amount and the interest cost at the beginning of the loan. So, get the rate down as soon as you can to reduce your costs. The iLending car refinance calculator can help you determine how much money you can save with refinancing.

Lower Monthly Payments

While refinancing may lead to a lower monthly payment, this is not always a good thing. You may save money if you have lower monthly payments due to lower interest. However, this is only true if you refinance close to the start of your loan period. However, if you wait for a long time before refinancing, your interest cycle will start over again. You’ll then be charged interest for many years. Even though the monthly payments are lower, this can result in higher costs.

A better loan may be possible if you have improved your credit scores from the original loan. You may be eligible for a lower interest rate, lock in a low fixed rate, and possibly even get rid of a borrower.

Make Sure To Avoid These Mistakes

While refinancing can be appealing, it can lead to you spending more than you need. Avoid these common pitfalls if you have only a few years remaining on your auto loan.

  • Stretching It Out

A more-term loan typically means that your car will cost you more. However, you pay more over the loan’s life. This can help when your cash flow is tight. However, the overall cost of a long-term loan will be higher. This is counterintuitive because you’ll see a lower amount.

  • Going Upside-Down

If you extend the life of your loan, it can lead to your loan being upside down. You could end up owing more on your car than you are worth. To get rid of the car you will need to either write a check or continue making payments on it.

  • Prepayment Penalties

You may still be subject to prepayment penalties. It is possible to have extra charges to repay an existing loan earlier than you originally agreed. You could lose any savings from a lower interest rate if you have to pay penalties.

  • Refinance Not Ready Yet

If you have done the calculations and decided that refinancing is an option, it can be costly. The rates are usually the lowest for new vehicles. Refinances made immediately after purchasing a vehicle from a dealer or taking advantage of incentives may be eligible for a “new-car” rate. New car rates tend to be higher than used car rates.

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