One of the most beneficial products is a car loan refinance. You can use it to finance a car purchase or to obtain financial relief. Here are some Points that car refinancing can be helpful:
- Repay an existing loan with a new loan
- Lower your monthly payments
- Can help you deal with emergencies
A New Loan To Pay Off An Existing Loan
Car refinancing simply means that you will take out a new loan to pay off an existing loan. Your vehicle will be used for collateral. To recoup the loss, the financer can take your car to repose if you fail to pay the new loan.
Refinanced loans are a new agreement between you, the financer that refinanced your vehicle. This means that you and the financer who refinanced your car will agree on new terms such as the interest rates, monthly payments amount, and the duration of the loan. A Car refinance calculator allows you to estimate your automobile loan payments.
Could Lower Your Car’s Monthly Costs
Refinancing a car is beneficial because it almost always results in lower monthly car payments. This is due primarily to the terms of the new deal, such as the loan term and the interest rate. The interest rate on a new loan is usually lower than the one you have now, but it will cost more.
Let’s say you purchase a car for a set price. You borrowed the amount you needed to purchase the car. It was subject to an annual interest of 6%, which will be paid every 48 months (4 years). You realize after 12 months that you are unable to afford the monthly car payments. The time to refinance your car is now.
The new lender will pay off your remaining balance on the original loan and then offer you a new loan. The new loan will amount to the same amount but have a lower annual rate of 3% that you will pay over 48 months. Refinancing your vehicle in this manner will result in you paying 60 monthly payments. This is because your car was paid off for 12 months but you took out another loan for an additional 48 months.
What does all this mean for your monthly payments, though? Without going into complicated calculations, you are paying for the same amount as you owe but for a longer-term. This will result in a decrease in your monthly car payment. The new interest rate of 3.3% is a significant drop from the old rate. In the end, your cumulative interest payments will be lower than if it wasn’t refinanced.
Can Help With Emergencies
The above information about car financing is meant to help people adjust to any sudden changes in their lives. An example is if you have an auto loan to get a car so you can travel to work. You lose your job suddenly and you can’t pay the loan off. This can put you in a financially unstable situation.
Refinancing a car loan is a great option. Refinancing your car loan can help you save time and make better financial decisions.
This loan can be used to help people in emergencies. This can include sudden changes in their income and financial management.