What is Auto refinancing?

November 28, 2019

Auto refinancing means a process in which you can pay off your existing loan with the new one by acquiring a new lender. It is a great source for saving money and also you can lessen the monthly payments. In order to avail the option auto refinancing, you should have a positive history between six to 12 months and payments should be on time. The amount of new loans highly depends on your history and credit score.

How does auto loan refinancing work?

It replaces your existing loan with the new loan by involving another lender which provides a low rate of interest. You have the option to keep the length of the loan as you like and you can increase or decrease the duration of the loan.

The amount of new loan is the balance left on the existing loan and also lenders provide you the option to take the cash out at the time of refinancing. We suggest you do not take the cash out it increases your debt which means owing more than the value of the car.

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Is it necessary to refinance a car loan?

There is no certain answer for this as it has the involvement of various other factors that make refinancing a car loan worth.

● Lower Interest rates

Fluctuations in interest rates are way common and they are changing every now and then. Even the changes are very minor just 2-3 % can save you dollars and results in saving. The positive credit score provides you a lower rate of interest which finishes off your loan at the earliest and also you can save money by paying off your loan. Win-Win situation.

● Better financial position

Lenders focus on many factors in order to decide the loan rate which has the inclusion of your credit score and debt to income ratio which is calculated by dividing the monthly income by monthly payments. The improved credit score provides you a better platform to refinance the loan.

● Facing issues in managing monthly bills

The time when you have acquired the car loan, you wouldn’t score a good deal which implies you had a long repayment period. In order to lower down the monthly payment, it is required to negotiate the repayment period on the existing loan.