Bad Credit Auto Loan Refinancing Lower Interest Rates Means Lower Monthly Payments |
|
Interest rates today are at an all-time low level and as such, apart from refinancing your mortgage to below 6%,
consolidating your credit card debts onto a Visa card at a competitive 12%, and reducing the rate on your student loan, you can refinance your bad credit auto loan and make considerable savings on your monthly bills over the life of the bad credit auto loan. More and more people are now applying for refinancing of bad credit auto loan. As a result, online vehicle financing business (including refinancing) is likely to touch $32 billion by 2006, as per the estimates of a research firm. As there is no appraisal process involved, it is much easier to get than a new mortgage. Credit unions are good for getting to refinance a bad credit auto loan as auto refinancing has become the main business for nearly two thirds of them. If you belong to one of them, you can call them or go online to get a good deal in your area. Most online lenders do not charge any fees but sometimes there is an application fee of about $20. You should ask about the processing fee, which is charged by some of them. Moreover, to get a new car title, you may have to pay $5 to $10 to the department of motor vehicles. When you refinance, you take out a used-car bad credit auto loan, which might have a higher rate than on new-car loans but it would still be lower than what you are currently paying. For example, if you owe $25,000 on your three-year bad credit auto loan with an interest rate of 8%, your monthly payment would be $783. If you shop around and get an interest rate of 5.4%, your monthly payment will come down to $753, which will give you savings of $1,100 over the period of your loan. To determine whether you should proceed with a new bad credit auto loan with a lower rate, you should consider the following: If you didn't shop well in the first place You might have purchased a car through a dealer and you did not negotiate properly and landed up with a rate of 8% to 9%. You should look for a competitive bad credit auto loan before buying a car. You should shop for financing and you should check credit unions, banks and internet lenders to strike the best deal. You should also check the manufacturer who might also have a financing deal that might be better than the others. In any case, make sure that there are no pre-payment penalties so that when the rates fall, you can take advantage of them. If you still owe a large amount For refinancing, the car should be less than 5 years old and have a minimum balance of $7,500. Many lenders will not underwrite a bad credit auto loan that's not worth the amount you owe on it. If your credit has improved Refinancing can be very gainful if you had bought the car when you had poor credit and if now your credit has improved. For example, if the original 60-month loan had been settled at 11% on a $23,000 car, your monthly payment would be around $500. You could save $57 a month by refinancing at 5.8%, which will mean a saving of more than $3,200 over the life of your bad credit auto loan. If you are having cash-flow problems Refinancing your bad credit auto loan into a longer term and a lower rate can bring down your monthly payments and thus improve cash flow. A smart move If you refinance your home, you can use the savings to pay off the bad credit auto loan at the same time. This will also result in extra savings, as mortgages are tax-deductible, unlike car loans. However, you must be careful, as you will still be paying for the first car. |
