auto

Refinance your car loan and save money

Tara Baukus MelloQuestionDear Driving for Dollars,
I just financed my first car. It's a five-year loan. What's the best way for me to save money on the car loan? Should I refinance or should I just add extra to the principal each month?
-- Johnny

AnswerDear Johnny,
Refinancing your car loan is one way to reduce your overall car loan costs and save money, but it only works well if you can refinance and reduce your interest rate by at least 2 percent -- and ideally a lot more. There are also restrictions on whether you qualify for a refi based on the age and value of your car as well as how much you owe. You may not be able to qualify for a refi if you owe too little or too much, if your car is more than five years old or if it's worth less than you owe.

Because you recently bought this car and it sounds like you have extra money, your best bet is simply to add more to your principal with each car payment. This will save you in interest payments and allow you to pay off your car loan sooner. To see how much you'll save, use Bankrate.com's early payoff calculator.

Ask the adviser

If you have a car question, email it to us at Driving for Dollars. Read more Driving for Dollars columns and Bankrate auto stories.
 

Bankrate's content, including the guidance of its advice-and-expert columns and this website, is intended only to assist you with financial decisions. The content is broad in scope and does not consider your personal financial situation. Bankrate recommends that you seek the advice of advisers who are fully aware of your individual circumstances before making any final decisions or implementing any financial strategy. Please remember that your use of this website is governed by Bankrate's Terms of Use.

advertisement

Show Bankrate's community sharing policy
          Connect with us
advertisement
 

A little research could save you BIG on interest.

Don't have time? Our rate-tracker tool saves you time and money. Delivered Thursdays.
 
advertisement
Partner Center
advertisement

Blog

Tara Baukus Mello

Customize your Aston Martin car

Aston Martin is offering buyers the opportunity to fully customize their cars.  ... Read more


Connect with us