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Refinance a car loan? Yes,
if ...
Dear Debt Adviser:
My auto loan is 7.99 pecent. I am 2.5 years into the five-year
term. I would like to take advantage of the market's low rates.
How can I go about refinancing my auto? I do not see any readily
available loan products for this. What type of loan would this be?
Chris
Dear Chris:
You are wise to consider refinancing your car loan. At today's
prices for automobiles, SUVs and trucks, a car loan can be tens
of thousands of dollars. Consumers can save significant amounts
of money by paying attention to the details of their vehicle loans.
Chris, what you want is called a refinancing auto
loan. Several Web sites offer auto refinance loans. Also check with
other lending institutions, such as your bank, credit union or savings
and loan.
The main advantages to refinancing auto loans are
that they can make your monthly car payments less and your interest
rates lower. Consequently, you can pay off your loan faster or reduce
your monthly payment. With dropping interest rates, many people
are refinancing.
A general rule of thumb when considering a car loan
refinance is if your car loan APR is higher than what is being offered
in today's market. Even a 1 percent difference in your current APR
can save you money. How long you plan on keeping the vehicle can
also enter into your decision. If you are planning on keeping the
vehicle for several more years, then refinancing may well be worth
it.
You stated that you are currently paying 7.99 percent;
the market today offers car loans at lower rates. You can search
for current car loans through Bankrate.com's auto
loan search engine. Shop thoroughly -- you're switching from
a new-car loan to a used-car loan, and used-car loans usually carry
a higher percentage rate.
The earlier in a loan a person can refinance, the
more money will be saved. Even though you have paid off half off
your loan, you should still research what rates are available. However,
$7,500 is approximately the lowest limit that most auto refinancing
agencies will consider.
When you apply for your new loan, make sure you give
the same names with the exact spelling as they appear on your current
auto loan. Also provide the 17-digit vehicle identification number.
You can find this number on your car dashboard and on your registration
papers. This has a lot of numbers, but it has to be accurate.
One other matter. You cannot take out a loan for more
than what the vehicle is currently worth. Look up the value of your
car to see if it is worth more than what you owe on it.
The only costs associated with refinancing your car
loan are the transfer of lien holder fees and state re-registration
fees. Also, you need to make sure that your existing loan does not
have a prepayment penalty clause.
As with any contractual agreement, read the fine print.
You must know the details of your current loan and the one you are
considering.
I think you are on track concerning your car loan.
The Debt Adviser, Steve Bucci,
is the president of Consumer Credit Counseling Service of Southern
New England. Visit CCCS
for additional debt
advice or click
here to ask a debt question.
-- Posted: Dec. 27, 2002
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