Lower payment without extending car loan?

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Dear Driving for Dollars,
Is it possible to lower my monthly car payment without extending the terms? I have good credit.
— Pat

Dear Pat,
It is possible to lower your monthly car payment by refinancing the car loan. Refinance rates have dropped quite a bit over the last six months. The national average was recently 2.44 percent for a 36-month loan, so chances are good that you could lower your interest rate, assuming you’ve had your car loan for a while.

To qualify to refi your auto loan, generally speaking you need to have at least a medium-quality credit score, your car needs to be worth at least what you owe and it can’t be more than 5 years old.

You asked specifically about not extending the terms. If you get a new loan, you will likely need to apply for a refi for a specific loan type, such as a 36-month loan, so you’ll probably want to choose the length of a refinance loan that is closest to the number of months on your current loan. That may mean extending your loan term by a couple of months or choosing to shorten the term significantly, which might not provide the monthly payment savings you would like. You also could talk with your current lender to see if it would refinance for the exact number of months you owe, though it still may require you to use one of its standard loan packages with a specific term.

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