When Can I Refinance A Car Loan?

Clients often ask me, "When can I refinance a car loanall" In this article we will talk about when the best time is to refinance your loan, and share the benefits of refinancing a car. Refinancing a car loan can save you $100 a month or more on your monthly payments, plus you spend a lot less money on interest and pay your balance of faster.

There are times that people feel trapped in a high interest rate car loan and want to get a better rate to lower their monthly payments. What ever your reason is for refinancing your car, it can be a viable way to better your financial position.

Here are the three best times to refinance a car loan.

When Interest Rates Drop

Borrowers who have bad credit end up paying a high interest rate for their car loans. There are times that the banks will lower the prime rate of interest, (this is the amount of interest banks charge for the use of their money), when this happens it can lower the rate of interest to the consumer. Depending how much the rate drops you can save yourself hundreds or thousands of dollars over the term of your loan.

Refinance When Credit Improves

Most people who are paying high interest rates on their car loans have bad or poor credit to start with. As the borrower makes their payments, on time, they are improving their credit and creating a more positive credit history. Keep in mind you also need to make your house or rent payments and credit card payments on time too. By doing this it is possible to raise your credit score so you can qualify for a better interest rate.

Refinance To Get Rid of a Co-Signer

Sometimes the only way a person can get a car loan is with a co-signer. Most car loans run between 3 and 6 years to repay, however, things can change between the borrower and co-signer and it may be in the best interest of both parties to refinance the car and remove the co-signer from the loan. It's best to refinance the vehicle under just the owners name.

Benefits of Refinancing

After getting a car loan, most people believe they are locked into the monthly payment and terms of the loan until the car is paid off. This isn't true, you can refinance at any time.

By lowering your interest rate a few points, you can put extra money in your pocket every month. Especially if you are paying over 15 percent on your loan. What's more is that you can pay your car off faster with a better rate of interest. You can also pay your loan of quicker by making extra payments on the principal. For example if you are paying 20 percent and cut it in half to 10 percent, you will reduce your total cost of the car by fifty percent. You could save between $2,500 and $10,000 by refinancing a car loan.