least 1% lower APR than your current loan. On a $20,000 loan at 10%, if you have a 60 month loan and you've been paying for 6 months, you can save $528 if you refinance your current loan to one at 9%. $528 doesn't seem much but what if you can refinance at a much lower rate.
That's true for people who bought a car but whose credit wasn't so good and who need to improve credit score. So the dealer found a new auto loan for you at 21%. And you agreed since there's nothing much you can do. You had bad credit and you just needed a car to go work.
Now you've been working six months, had been making your monthly payment on time every month. Time to find a car refinance loan. Let's do the math: if you can find a loan at 11%, still a little bit high but a good 10 points lower than your current loan, refinancing auto loan would be fantastic. Most lenders, if you've been making timely payments on your car loan for 6 months, will be willing to give you a try.
The table below makes comparisons between a 21% and 11% APR on a loan of $20,000 with 54 more months to go (41/2 years):
You just saved yourself $5,782 if you refinance at 11% during the duration of your loan - 54 months. Isn't that neat? You could have saved $98 a month if you take out a car refinance loan with 41/2 years to go on your high-interest loan.
That money could have been used for something else, like paying off another high interest rate auto loan or you can deposit it in a savings account, a CD, money market, even invest it in stocks. Let that money sit in your bank account and not in that finance company's coffers. You can also buy another used car for your daughter in cash.
The secret that makes finance companies rich is called the power of compounding. In fact, if you can make it work for you, you'll have more money in your pocket, not in financing companies' coffers. Let's assume that you put that $98 monthly savings when you refinanced your loan on an investment account that yields 6% annually for 5 years.
Monthly Deposit: $98
Total after 5 years
Now you are $6,843 richer after you had paid off your loan. Instead of paying $5,782 more in interest charges, you have gained $6,843 in your pocket for a positive gain of $12,625. Refinancing auto loan now if you qualify and if you can lower your interest rate at least 1% is a must.
It's unfortunate for any car buyer to be charged an unfair interest rate. One reason why it happens to them is ignorance of their credit rating. If you know it before you go car shopping, and you have a printout of your credit score, car dealers won't be able to tack a higher interest rate. You had done your job and won't have to get a car refinance loan later.
Consumers should know about a practice used in the auto business
called "dealer markup." Here's how it works. You go to an auto dealer and agree to buy a vehicle for a certain price. You then tell the salesperson that you are either going to finance the car or lease it through the dealership. Before you go into the finance and insurance room to review the final documents, the finance manager begins shopping for a car loan on your behalf. He found that you qualify for a 7 percent loan over five years.
The finance manager calls you in and tells you that he found a 12% interest rate for you. He had just marked up the interest rate 5 percentage points. The difference between what the bank charges the dealer and what the dealer charges you is their profit. If the dealer is upfront with you, you wouldn't have to get a car refinance loan later.
Always, always know your credit inside and out.
The table below lists the most current interest rates and will give you an idea of what rate your FICO score qualifies for:
New Car Loan Avg. Rates
You should take out an auto refinance loan if you think that your interest rate is high. Don't postpone it any longer. Every day that you tarry costs you money.
Take advantage of attractive rates and refi your auto loan with My Auto Loan.com
. "Auto Refinance"
now and lower your auto loan rates. Doing so saves you money.