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Home > Auto Loans >Bad Credit Auto Loans > Refinancing A Bad Credit Auto Loan when Prices Soar
Refinancing A Bad Credit Auto Loan when Prices Soar |
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If your bad credit auto loan has a high
interest rate tag on it, you should get your loan refinanced when the interest rates are down, thus saving money. At present the interest rates are again on the rise and if you have not got your loan refinanced as yet, now is the time before it is too late, especially if you have a long (4-, 5- or 5-year) bad credit auto loan from an earlier, high-interest rate time. Of late, there has been a lot of brouhaha regarding car dealers making a profit when they sell financing and arrange bad credit auto loans for customers buying vehicles from them. Why has the media created such a ruckus? Isn't everyone entitled to a profit when he offers his services? When interest rates slide down, refinancing an existing auto loan can mean sizable savings for the consumer. As the interest rates are all set to rise again in the very near future, it is still not too late to refinance your vehicle bad credit auto loan. If you spare some time to consider refinancing, you will definitely end up richer. People find it convenient to finance their bad credit auto loans through dealers but what they don't realize is that the dealer doesn't always give them the lowest rate they qualify for, and that could cost them more money over the life of their bad credit auto loan. If you had financed your bad credit auto loan a few years back, when the interest rates were high, you will find that with today's lower rates you can either shorten the bad credit auto loan term with the same monthly payment or you can lower your monthly payments by sticking to the same term of the loan. You will be saving money either way. If you are hesitating to go in for refinancing because you think that getting a home mortgage refinanced would mean endless stream of application fees, registration fees and closing costs that accompany the transaction and that you will end up spending much more than what you might save, this is not the case. If you can find the right lender, refinancing can be done with minimal fees and out-of-pocket costs. In some states, you only need to pay $15-$25 fee to transfer the lien. You have to be careful about one factor if you go in for refinancing. You must ensure that the existing bad credit auto loan has no pre-payment penalties. You can derive great benefits if your simple-interest bad credit auto loan with no pre-payment penalties is refinanced into a simple-interest bad credit auto loan with a lower rate. On the other hand, pre-payment penalties can negate the savings of a new lower-interest bad credit auto loan. While evaluating your bad credit auto loan, you must consider both interest rate and the term of the loan. To reduce the total amount that you will be paying, you should refinance the bad credit auto loan at a lower rate for the same, or reduced length of time. By reducing the term of the loan you would have to pay more per month and if you can afford it, you would be out of the loan faster, thereby saving more money in interest. Conversely, by dropping the monthly payment by refinancing at a lower rate, you would be extending the term, thereby increasing the total interest paid over the span of the loan. Here is an example of how much you can save by refinancing. By refinancing a $28,000 auto bad credit auto loan from a 9.0% interest rate to a 5.75% rate, over 60 months, you could save $43 a month, which adds up to $518 a year or $2,590 saved over the life of the bad credit auto loan. If you plan to refinance your loan, you should go to more than one bad credit auto loan source, so that you can compare their offers and then choose the one which would give you the best deal. |
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