when should you refinance your car

How Long Should You Wait To Refinance A Car

Should I Refinance My Car?

If you continuously keep asking yourself, “Should you refinance your car?” then its time you fix an appointment with some expert. Such a move may not just enable you to get out of the confusion but also help you to understand whether car refinancing is primarily right for your specific situation.

CarLoanStudent can assist you to get connected to a competent local specialist who can guide you on the subject.

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When Should I Refinance Car?

You may wonder as to how long should you wait to refinance your car but your decision to refinance car has to be based on certain factors as mentioned below:

Interest Rates & Monthly Car Payments

You can consider getting your car refinanced to a lower interest rate if:

  • Interest rates on existing auto loan is high making monthly car payments unaffordable
  • Your monthly income has dwindled due to decrease in working hours and you fear that you might go upside down on your car loan
  • Prevent yourself from going underwater on your auto financing loan on account of high monthly car instalments
  • Your credit score has improved and you want to take advantage of lower interest rates

Perform a Cost vs. Benefit Analysis

Prior to embarking on the process to refinance an auto loan, it could be vital for you to perform a cost vs benefit analysis. While calculating overall costs for refinancing car, pre-payment penalty or closing fees need to be considered. Only if the outcome ensures that you can save money over the long run, should you go ahead with your decision to refinance. Remember, the basic purpose of auto loan refinancing is to save money and it must be met.

Understand Lenders’ Requirements

Majority of the lenders will approve car refinance loan applications only if some basic requirements are being satisfied as under:

  • Total amount of loan dues owed must be more than $7,500
  • Car which is to be refinanced must be less than 5 years old
  • You must be current on existing monthly car payments for past 12 months
  • Car price must exceed the amount of loan dues being owed
  • Applicant must have sufficient income to pay monthly car instalments on time

How Long Should I Wait To Refinance My Car Loan?

At CarLoanStudent, our experts will advise you on how long should you wait to refinance a car loan. It is needless to say that high car loan payments can be nightmarish and if you start feeling the pinch on your pocket, its time you considered getting your vehicle refinanced to a lower rate of interest. Here is some information relating to the same which you may find useful during your effort.

Know When to Refinance Your Car

If car loan interest rates have declined considerably ever since you purchased your car, it might be the best time for a refinance. Lower interest rate implies reduced monthly car payments but to get them there must have been a significant improvement in your credit score. If so is your case, start searching for lenders that might be willing to offer you a low rate refinance auto loan. The best place to find such auto loan dealers is the internet.

Use Should I Refinance My Car Calculator to Compare Refinancing Fees

For getting your vehicle refinanced to a lower rate, you will have to bear certain costs in the form of closing charges or loan pre-payment penalties as well as fees for transfer of “Title” from one lender to another. To that effect, for reducing costs, you need to compare fees charged by different loan dealers by using our advanced online “Should I refinance calculator”. Besides, it could be imperative for you to shop around extensively for finding an interest rate that is at least 2 percentage points lower than what you are paying currently.

Make Sure That Market Value of Your Car Is More than Total Loan Dues Owed

It could be difficult to get your car refinanced if your car doesn’t have any market value. That is why majority of the lenders prefer borrowers who have cars that are less than 5 years old. Car values depreciate fast and to refinance cars to lower interest rates, you need to make sure that your car is worth more than the total amount of loan dues being owed meaning you are not upside down on your existing auto loan payments.

Check Whether You Are Required To Pay Any Loan Pre-Payment Penalties

Before you are out to apply for a refinance car loan, you must find out whether you will have to pay a pre-payment penalty for an early loan pay-off. For this purpose, you need to go through fine print of your existing or original car loan contract agreement and determine if there is any such clause. A steep fee towards penalties can reduce overall monetary savings accrued by way of refinancing. So ensure that you are making an informed decision.

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When Should I Refinance My Car?

If you are still confused on when should you refinance your car, here is some important piece of information. People normally, consider refinancing cars for 3 different reasons. These are as follows:

To Lower Monthly Car Instalments

The most common reason for getting cars refinanced to lower rate is lowering of monthly payments. Remember, level of car instalments can adversely affect household budget especially when financial circumstances change. But still, you need to be a little bit cautious as new loan will have new term and lot could depend on the duration of the loan you choose. A longer term will mean spending more money on interests.

To Reduce Car Loan Interest Rates

Many borrowers are concerned regarding the amount of money they spend on their cars rather than think about monthly payments. If your original auto loan has a high interest rate and longer car loan term, your monthly payments may appear to be affordable but imagine the amount of money you will end up paying more money on interests over the entire life of the loan even while your car loses all value. A reduction in interest rate can lower monthly car instalments.

To Add or Remove Name of a Co-signer

Other than lowering monthly car payments and reducing interest rates, some people may even have personal reasons for refinancing cars such as adding or removing name of a co-signer from an auto loan. Such a proposition might hold particularly true for couples who undergo marital splits wherein partner may be co-signer. Whatever may be your personal reason, it could be important for you to secure a car loan that satisfies your requirements.

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