Hidden Money: Refinance Your Car Loan

People usually consider refinancing their home mortgages, or getting a home equity loan as the interest rates drops- but why don't most people consider refinancing a car loan? Auto loan refinancing is easier to do than refinancing your mortgage, and it's well worth the effort as it can save you considerable amounts of money.

How Much Can Be Saved with an Auto Loan Refinance?

If you purchased a new car six to nine months ago, and at the time you had a few late payments that showed up on your credit report- chances are you got an auto loan with a higher than preferred interest rate of about 11%, over a five year term. Your monthly payments on a $23,000 car would be a staggering $500.

When you find a company that provides car refinance loan opportunities, you can have the remaining balance owed on your car loan and probably lower your payments to $400 or so each month. Over the five year term of your automobile loan, you would be looking at savings of about $6,000. Do you know what you could do with the $100 difference each month? Use it in an investment program or high interest savings account and let it earn you money instead of being wasted on interest for your car loan!

Auto Loan Refinance Companies

There are many companies that offer car refinance products, but there are three that are among the largest and most popular:

You may prefer to start with Bankrate.com, as the site will match loan applicants with different banks (they may even match you with E-Loan or Capital One Auto Finance).

Who Should Consider Auto Loan Refinancing

There are four types of people who are most likely to consider an auto loan refinance- and all types can benefit!

Consumers who save. This group of car owners watch the Federal Reserve for interest rate decreases, and start shopping around for opportunities to lower the amount of their payments and interest rates. This group works hard to improve their credit score, and is likely to shop around each time they get a better credit score that would result in the ability to obtain a better interest rate.
Consumers who financed a vehicle through a dealership. This group will usually later find out that they got a high interest rate through the dealer, and that they could have gotten a much lower late if they financed the car loan through a bank or other means instead of the dealer. This sometimes is called 'buyers remorse', and the individual will start searching for a car refinance loan to improve the situation.
Consumers on a budget. This group of people will buy a car with a short term loan of about two or three years. The payments are quite high, but seem affordable at the time. If the customer loses his or her job, or buys another high ticket item (like a house), the amount of available cash flow each month decreases and the individual decides the best way to improve the available cash each month is to spread the auto loan out over a longer period of time and this can be done with an auto loan refinance.
Consumers who got a car on a lease. This group often decides at the end of the lease period that they want to keep it. They're happy with the performance of the vehicle. An auto loan refinance can help buyout the lease and establish a car loan.