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Three Tips to Refinance for a Cheaper Car Loan
Owning a car brings along with it the need for financial responsibility. After all, a car loan is a serious financial investment that needs to be repaid on a monthly basis in order to retain possession of the car as well as to maintain a good credit history. Unfortunately, all too often, car dealers are loath to provide their customers with inexpensive options for financing a car. Perhaps it is due to the fact that cars depreciate in value the moment you drive them off the car lot.
Whatever the reason is, that does not preclude you from the opportunity to refinance your car loan at a later date. In fact, it really is in your best interest to refinance in order to lower your monthly car payments and save some money. In essence, you have three good options when it comes to refinancing your car loan to change your monthly payments to something more affordable.
Refinanced Car Loans
Getting a refinanced car loan simply means replacing the first car loan with a new one. This type of loan can be secured or unsecured, although a secured loan will bring about a better interest rate. However, it is important that you only refinance the car loan if the new terms are more favorable for you.
Renegotiated Car Loans
Negotiating with your lender about your car loan might not be the best option, but it certainly is worth a try. Renegotiated car loans are easier to get when the lender isn't the car dealer. After all, the dealer has already made his largest chuck of profit by selling you the car. The car dealer doesn't need to be concerned with saving you money over a renegotiated car loan because the sale has already been completed.
However, if you are struggling to meet your monthly payments, you can bring up the need to achieve lower monthly payments. For a higher interest rate, the lender might renegotiate your car loan for an extended time that would effectively lower your monthly car payment. Both the car dealership credit office and outside lenders should be up for this type of refinancing.
Home Equity Loans
Getting a loan based on your home equity and using it to refinance your car loan is a feasible option that usually brings with it a savings in interest. Home equity loans and cash out refinance loans are well known for having lower interest rates attached to them due to the nature of the collateral that is offered for them. Obviously the collateral for this type of loan is the borrower's home.
With a cash out refinance loan, the homeowner can borrow enough money to pay off both the existing home mortgage loan and the car loan. The new loan should provide a lower monthly payment than the total of the two monthly payments for the mortgage and car. With a home equity loan, the homeowner can use the money to pay off the car loan. Since the interest rate on the home equity loan should be lower than the interest rate attached to the car loan, the borrower should realize a savings.
