Refinancing A Car Loan

The term "refinancing" should be familiar to​ anyone who has purchased a​ loan. Simply put,​ refinancing is​ the​ process of​ obtaining a​ loan to​ pay off an​ existing loan. Obviously it's not quite as​ simple as​ it​ sounds,​ but understanding that basic description is​ enough to​ begin the​ process of​ learning about refinancing.

One of​ the​ best-kept secrets in​ the​ finance industry is​ refinancing. a​ great deal of​ time,​ trouble,​ and most importantly cash can be saved through this method alone. Home refinancing has been around for a​ long time now and is​ used by many people to​ save money on​ their loans and/or reduce their monthly payments. However,​ many people still balk at​ the​ idea of​ car loan refinancing despite being familiar with the​ benefits of​ refinancing a​ home loan. Those who have a​ less than perfect credit rating to​ back them up,​ in​ particular,​ are likely to​ react this way.

What exactly is​ different about car loan refinancing? in​ essence,​ nothing. at​ the​ basic level,​ car loan refinancing works the​ same as​ refinancing your home. in​ car loan refinancing,​ a​ new car loan is​ obtained in​ order to​ pay off the​ existing car loan. the​ new loan may have different (typically better) interest rates,​ a​ new lender,​ or​ both. Again,​ as​ in​ home refinancing,​ this is​ beneficial since car loan refinancing can make your monthly car loan payments lesser. Alternately lower interest rates garnered through car loan refinancing can be capitalized on​ to​ pay off the​ balance of​ the​ current car loan in​ a​ shorter period of​ time.

Very few people understand the​ time value of​ money--that the​ longer a​ loan is​ paid on,​ the​ more money is​ spent on​ interest charges. Take for example a​ 60-month loan for $16,​500 on​ a​ new Honda Accord and assume that the​ buyer's credit is​ poor. the​ car dealer manages to​ get the​ buyer approved at​ 21% APR for that loan,​ making the​ monthly payments $446.38. By the​ end of​ the​ loan term,​ the​ buyer will have paid $10,​282.83 on​ interest charges alone--almost as​ much as​ the​ initial price of​ the​ vehicle (which,​ of​ course,​ is​ now worth far less than when it​ was purchased). Now,​ if​ the​ car loan were refinanced with another lender at​ 6% APR after the​ first few months,​ the​ monthly payment would have been $318.99,​ allowing the​ buyer to​ save as​ much as​ $7,​643 on​ interest charges. if​ the​ buyer refinanced at​ the​ lower APR but retained the​ same monthly payment,​ the​ term of​ the​ loan would be shorter and the​ interest savings even higher.

Record numbers of​ homeowners refinanced their homes and saved thousands of​ dollars during the​ years 2001 and 2002. More car owners are beginning to​ realize the​ benefits of​ car loan refinancing every day. With the​ steady drop in​ interest rates,​ car loan refinancing is​ fast becoming a​ trend as​ more and more people realize how much money can be saved simply by refinancing a​ car loan.
Refinancing A Car Loan Refinancing A Car Loan Reviewed by Henda Yesti on August 23, 2018 Rating: 5

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