13. April 2019
Not all car loan refinance deals are the same, but customers who chose to refinance often seek one of the following outcomes (this list is not exhaustive).
Lower Your Monthly Payments
Most of the time, people seek car loan refinancing to lower their monthly payments. This priority is understandable because monthly car loan payments can have an immediate impact on a household’s monthly finances. However, your monthly payment should not be your only consideration when refinancing as the sections below describe.
You have two ways to lower your car loan monthly payments. You can get a lower interest rate, you can extend your loan term, or you can do both. Usually, the best way to lower your car loan payments dramatically is to extend the number of months over which you pay for your car. However, when you extend your loan term, you may end up paying more for your car in total than you would without extending it. Still, if your lender allows you to extend your loan term and gives you a lower interest rate, you may both lower your monthly payments and pay less in total for your car. The example below will illustrate how this outcome can occur.
Decrease Your Interest Rate/Reduce Your Interest Charges
While it is interrelated with the goal of lowering monthly payments, some refinance customers prioritize lowering the interest rates on their loans. If during the course of your car loan, you improve your credit worthiness in the eyes of lenders (they sometimes evaluate you according to the Four C’s of Credit), then you usually can get a new loan on your car with a lower interest rate, and when you lower your interest rate you may reduce the total interest charges you pay on your car loan – assuming your car loan term is not extended or not extended by too many months.
Want to see how much refinancing may save you? Try our auto loan refinancing calculator.
Change The Length Of Your Loan
Sometimes refinance customers seek refinancing with an aim to change their loan term lengths. However, this goal usually has more to do with lowering monthly payments than just changing how many months over which a customer pays for his/her car.
Remove Or Add Someone As A Co-Signer To Your Loan
For various personal reasons, sometimes car loan borrowers want to refinance to remove someone from or add someone to their car loans. Refinancing is an easy way to take someone off of your car loan because the refinance process gives you a new loan with a new contract.