Reasons to Refinance an Auto Loan

Did you get a bad deal on your last auto loan? If so, don't worry. There are many ways to get a better deal. Each day, hundreds of auto buyers are duped by dealerships. Getting approved for a loan is simple. Obtaining the best loan package is difficult. Because the vast majority of auto buyers don't compare different loans, and fail to shop around, they agree to bad loans. If you're looking to get a better rate on your car loan, think about an auto refinance.

Here are three good reasons to apply for an auto loan refinance.

Get a Better Rate: If you had bad credit when applying for an auto loan, the dealership or finance company likely approved you for a high interest rate. Individuals with good credit can typically qualify for rates around six or seven percent. If you have poor credit, expect to pay eight percent or more. The extra percent increases finance fees, which increases the monthly payment. The best way to lower the rate is to improve your FICO score, and refinance the auto loan. It doesn't take long to boost your score by a few points. If possible, try and refinance the auto loan within the first two years.

Extend the Loan Term: If you plan on keeping a vehicle, but can't afford the high payment, consider refinancing the vehicle loan for an additional three or four years. A refinance replaces the existing loan with a new loan. Since the new loan amount is lower than the previous, your monthly payments will decrease, and you'll save money each month.

Lower Monthly Payments: So many people purchase vehicles that they cannot afford. Additionally, some people choose short finance periods, perhaps two or three years. While a shorter term is great for paying off the vehicle early, it also increases the monthly payment significantly. If you can't handle the higher payment, contact your auto loan lender and apply for a refi. Refinancing for four or five years will reduce monthly payments by half.

Dissatisfied with Loan Terms: If your current loan features undesirable terms, or you simply don't like the lender's policies, refinance the loan with a new lender. Before applying for a new auto loan, get quotes from several different lenders. Contact your local bank, credit union, or private financial institution. Review the quotes carefully, ask questions about the loan, and choose the lender with the lowest rate and best loan terms.