Low interest rates have created a surge in mortgage refinancing applications in recent years, but not all consumers realize they can also save money with auto refinance loans. Depending on when you bought your car, the interest rate on your car loan could be at least one or two percentage points higher than today's auto loans. Calculate the potential savings by comparing the different loan rates using Bankrate's calculator.
After you compare rates on auto refinance loans, find out if you can qualify for a car refi. Check your car value from several third-party, vehicle-pricing sites and bring them to your lender. Lenders typically will refinance your loan if you owe between $7,500 and $30,000 on your car, if your car is less than five years old and if it is worth as much or more than you currently owe.
The next step to getting an auto refinance loan is to check your current loan terms and conditions to find out your total balance, your current interest and the existence of any prepayment penalty.
Most consumers choose to extend the length of their car financing because the goal is to reduce their monthly payments. If you were simply to refinance your car for the same loan term at a lower rate, you would unlikely reap significant savings. But, if you currently have three years left on your car loan and extend that loan through a refi for four or even five years, you could save $100 or even $200 per month, depending on the size of your loan and your current interest rate.
Another option, particularly if you are experiencing financial hardship, is to request a loan modification from your current car loan lender. Taking the time to investigate your options for auto refinance loans could result in a little breathing room in your budget.
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