Refinancing a Car Loan
Although it may seem appealing, when you refinance an auto loan, you would have to pay an increasingly high amount over the life of your loan. If you do not know what refinancing your car means, it is a process of paying off your existing online auto loan with a new one which is usually from another dealer. Doesn't seem so bad, does it? You get to pay off a pending debt after all so what could be the catch? Well, a few factors you should consider when refinancing.
Advantages of Refinancing a Car
1. Lower interest rate
this has to be one of the best reasons people even consider refinancing their cars. It reduces your interest rates. This is great for people with bad credit or no credit at all as over as little as two years they would receive better offers. When your credit score improves, you get to have a lower interest rate which helps you pay off your loan as soon as possible
2. Cash flow increase.
The good thing about refinancing is, you get access to more money than originally intended. Let's say you owe an amount less than the worth of your car, getting another lending for refinancing gives you access to more funding. Let's give an example of you having a car for 4 years and that car is worth let's say $10,000 and you just have as little as $5,000 for your first auto loan. After refinancing for a certain amount, you would have a little money to help you with any pending problems you desperately need to solve as soon as possible. That additional money you get from refinancing can be used for emergency bills, home improvement, school bills etc.
Disadvantages of refinancing your car
1. More interest over loan length
Although you would pay lower interest, when it is extended for a long period of time, then you would actually get to pay a whole lot more.It is advisable you make use of a loan calculator as it would help you know if you are saving or not. This would determine if it is worth it. So if you're going for refinancing just because you are looking for lower interest rates, it is very important to calculate your rates over the period of time your loan after repossession would last to determine if you should go ahead or not.
2. Higher Interestate
Higher interest rates would most likely be offered to you depending on the state of your vehicle. So if you are looking to refinance your car, you should be expecting a high-interest rate which may not be worth it at the end. For older cars it is relatively lower than a credit card rate, this is because your car would be used as collateral. Learn more via https://carloansbadcredit.wixsite.com/auto-loans/post/should-i-refinance.