Refinancing your car loan is like any other type of finance. You know you should do it because it makes sound financial sense but you just cannot be bothered because it's such a hassle right? Wrong! It's one of the easiest things to do and I am going to show you how easy, so keep reading.
Basically, like all loan refinance, it comes down to two options on why you would want to do it. The first option and probably the most common, is where you are looking to refinance because you cannot afford to keep making the repayments and you just know that if the situation carried on, you could end up getting your car repossessed. Believe me, that is one option that you do not want to happen. The second option is where you are simply looking for the most competitive rate. Usually your credit history will be good and you are one of these people who always shops around for the most competitive deal. Either way, both options are simple to arrange.
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Ok, let's look at the two different scenarios in a little more detail.
You cannot afford the car repayments anymore.
This makes perfecrt sense but often comes with one major problem. The greater the likelihood that you cannot afford the repayments, the greater the likelihood that you will have bad credit or a poor credit score. This makes things slightly more difficult (but not impossible) as the interest rate you will be charged for haing bad credit will be more than it would be for a 'clean' customer who does not have any bad credit. However, it is not impossible and many lenders will usually apply one simple trick to enable them to help you refinance - they will extend your loan repayment term. By doing this it enables them to still charge you a higher interest rate but it makes the repayments to you much more affordable.
You want a more competitive rate and by default, lower monthly car repayments.
This is the easiest part of refinancing a car loan as the chances are that you will have a pretty good credit score and will be considered 'clean' by lenders and banks. Most lenders (particularly in this tough 'credit crunch' period) will be falling over themselves to offer you the cheapest rate they can because after all, they know you will be repaying your debt as you have a history of good and regular repayments on any loans or finance you have previously taken out, whether it is for car finance or any other type of finance.
The difference with this type of refinance is the sheer number of deals that will be avaialble to you and the differences between each of them are sometimes so subtle that you wiill have to look at the small print to undersatnd in detail, what you are getting from them.
Use this quick list as the template for what you should be looking for or at least be asking them about:
Interest rate
Arrangement fee (or setting up fee)
Exit fee
Early repayment fee (or redemption and/or penalty fee)
In summary, do your homework as the sheer multitude of car refinance deals available are huge. Whatever your motivation for making this change, remember that a dealer is out to make money out of you, the customer, so whatever your circumstances, refinancing your car or auto loan is one of the wisest and most cost effective decisions you can make.
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