Should you refinance your auto loan?
Dear Driving for Dollars,
How do I figure out if I should refinance my auto loan? I owe $8,000 and have three years left at 13 percent interest! My rate is so high because I had just gotten out of college and had almost no credit history. I have more credit now and it's good, so I think I should be able to get a better interest rate. But the lender tells me the loan is higher than the value of the car. What should I do?
It sounds like you are a good candidate for refinancing your car loan now that you have established some credit. Auto refinance rates are also lower than they were last year, so this will also help reduce your costs. That's the good news. The bad news is that it sounds like you are upside down in your auto loan, owing more than your car is worth. You may need to use some savings to pay the difference between what you owe and what the car is worth in order to refinance. To learn more, including how to determine if refinancing is the right choice for you, read the Bankrate feature "Refinancing a car loan when money is tight."
If you decide refinancing is not the right financial choice for you, consider paying off your loan quicker, which will essentially reduce your interest rate. Use Bankrate.com's car early pay off calculator to see your potential savings.
Ask the adviserIf you have a car question, e-mail it to us at Driving for Dollars. Read more Driving for Dollars columns and Bankrate auto stories.
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