Blog Post by outsidesonia - 10/04/2018 11:45:46pm
Refinancing your auto loan can be a smart way to meet your monthly budget goals, save money, and even improve your credit score. Done right, it’s like earning a free vacation. We’ll show you how.
or all 3.
Amanda owed $26,758 on her auto loan, with an 8% APR and 48 months left to go. Since she took out her car loan, Amanda’s credit has improved (yay!).
Lower Interest Rate: Amanda’s monthly payment drops $25
By refinancing her car loan, Amanda lowered her APR to 6%. Amanda’s auto dealer could have offered her a 6.5% APR on her original loan, but marked up the loan by 1.5% (without telling Amanda – that’s legal!). Amanda’s hard work to improve her credit saved her another 0.5%. The result? Amanda’s monthly payment dropped by $25 and she saved $1,190 in interest over the life of her loan.
Skip A Payment: Amanda skipped her monthly payment
The first payment on Amanda’s new loan was not due for 45 days, which is typical in refinancing. Skipping that payment allowed Amanda to pay off $500 in credit card debt with a 24% APR.
Extended Loan Term: Amanda’s monthly payment drops $116
Imagine if instead Amanda had extended her 48 month loan to a 60 month term, with a 7.5% APR thanks to her improved credit. Her monthly payment would have dropped by $116. Even though she would be paying the loan off for longer, her stress levels would decline instantly with a more manageable monthly budget.
Refinancing your car loan can improve your overall financial health. Here are some ideas:
We never focus only on monthly payments when arranging or refinancing an auto loan. Your APR is critical: the lower, the better.