The Facts on Refinance Car Bad Credit Loans
You may have heard the terms “refinance your auto loan” or “car refinance” before, but what do those terms really mean? You may hear that it might be beneficial, but that doesn’t mean you should just jump into it.
With anything regarding money and loans, you should always do more research before you accept it. To help you learn more about whether or not car refinancing is right for you, take a look at some of the facts on refinance car bad credit loans.
What Is Car Refinancing?
Refinancing a car would mean that you change the current terms of your current car loan. You would be paying the present car loan by getting a new one and this is normally done as well with a new lender. For the car owners themselves, the results can be very different.
This is why you should know why you want to refinance the car and what you can get out of it before you do so. Otherwise you could end up with a terrible loan if you are not careful.
Why Do People Do Car Refinancing?
The main goal for many people who do auto refinancing is to be able to save money. However, saving money can be achieved in different forms since the loan terms would be different.
For instance, you might want to pay smaller amounts each month and that’s why you want to refinance your car loan. However, others may seek a new lender to acquire a lower interest rate.
There are people who have other personal goals that urge them to refinance a car. For example, you might have signed up for the loan with one or several other people, but those people may not need the car or are not paying for their portion of the monthly payments.
You can opt to refinance your car in order to have the co-signers removed from the loan. That way, the title of the car would be yours. Keep in mind that each goal might have different steps involved to get the desired result.
What Could Happen if I Refinance My Car?
You could find ways to save money by refinancing your car. You can opt to have the new lender extend the loan term, which means more monthly payments, therefore a lower monthly payment.
However, that could backfire on you easily on the long run if the interest rate is a bit high or doesn’t change because you would be paying for more interest rates due to the extra months added to your loan term.
Alternatively, you could try to refinance a car loan by asking the new lender for a lower interest rate, which is usually better in the long run. Whilst most people prefer lower monthly payments, you might benefit more from refinancing your car loan by making it a goal to look for a lower interest rate.
Sometimes your goal could just be to either pay off the loan quickly or extend it (for lower monthly payments).
Typically, you would benefit much more from a shorter loan term if you can afford it, because you will pay less interest rates throughout the life of the loan. You could also find better loan terms from a new lender in general if you are lucky.
Just be sure to do your research on the lender to make sure if they are legitimate first before making a new deal.
Another huge benefit that you can get out of refinancing a car is that you could end up with a much better lender.
You want a lender that is accessible, responsive, and flexible. Your new lender might be more lenient concerning what day of the month you pay off your loan or give you slack if you pay a day or two late.
There are lenders who may not let you pay off your loan early (because it helps you avoid additional interest), but your new lender may not mind you paying off your loan earlier than expected.
Are There Disadvantages in Refinancing a Car Loan?
You could actually run the risk of getting new car loan terms that have higher interest rates, which is something that you definitely don’t want.
This is not always the case of course since it will depend on the lender, but you should always make sure that you are refinancing your car loan for better terms.
Higher interest rates can occur in refinance car loans if the car is old, which of course will make the overall payments much more expensive for you.
You might want to get a car loan refinanced because you want to get lower monthly payments. Lenders offer people the same loan with lower monthly payments by extending the life of the loan.
When this happens, interest will be added for every month and since you extended it there would be additional costs all in all due to the extra months of interest.
Make sure it is worth your while to extend the loan term before you choose to do so to avoid paying for more than what you originally would have.
Keep in mind that refinancing a car loan will also cost money. There are fees to transfer the loan and exit it. There will also be upfront fees that you will have to pay for.
Try to calculate all of the fees combined and see if it is truly worth it to refinance your car or keep your current loan. You don’t want to unknowingly waste money because you weren’t careful.
What if I Have Bad Credit?
Luckily for most people, there are many refinance car bad credit loans available. Bad credit refinancing may be a bit more difficult compared to regular car refinancing for people with fair or good credit scores, but it is definitely possible.
For instance, if you have a bad credit score but have shown some history that you have started paying for your bills on time and paying off some debt, the lenders may be more willing to work with you.
If you were able to decrease or eradicate all of the debt that you have while still having a poor credit score, then lenders would still be willing to work with you.
There are also specific bad credit car refinancing options that are available to you. You just have to look for a reliable lender with a good reputation and see what they have to offer.
If you are seen as a person who has potential to correct their credit score, it would be fairly easy for you to refinance your car with specialized lenders or regular lenders.
Just be patient and “shop around” for lenders who will help you refinance your car loan.
However if you are not seen as a client with enough potential to be considered “correctable credit” there are still other things that you can do. For instance, you may take out a personal loan that is unsecured.
Use that personal loan to pay off the entirety of your car loan right away and you can just focus on paying off that personal loan. This can be more convenient if you do it right.
The key there is to look for a good personal loan, one with better loan terms compared to your current car loan.
You may be able to save more in the long run if the total amount to be paid off in your personal loan is smaller than whatever is remaining from your car loan.
For instance, to make sure it is worth your while, you should make sure that the personal loan is more affordable than your car loan.
You would want to look for lower interest rates compared to your car loan. Additionally, don’t forget to calculate the personal loan as a whole, including the interest rates and fees, and compare it to the total amount including interest for your car loan.
This will give you a better assessment as to whether or not taking out an unsecured personal loan would be worth it, or if you would end up spending extra cash.
Refinancing your car loan can be a great money saving move for you. Want to find out more? Visit dedebt.com today.