What is refinancing a car?


Woman with computer refinancing a car

 

If you’re interested in managing the cost of your vehicle loan, auto refinance is one option you should look into.*

Refinancing a car is the process of taking out a new loan to replace an existing note. The refinanced loan is a fresh contract, typically with another lender, that gives you the chance to agree to different terms. In many cases, the borrower will refinance to save money on interest or get a more comfortable monthly payment.

Here are four common scenarios.

Lower monthly payment – Refinancing can reduce the monthly payment as a result of a lower interest rate, longer term or both.

Lower interest rate – A reduced rate, with the same or shorter loan period, usually means you will pay less total interest over the life of the loan.

Longer loan term – Depending on interest rate, increasing the loan duration will make the monthly payment smaller. A longer term may lead to a greater interest charge overall, however.

Shorter loan term – Conversely, shortening the term could increase the monthly payment but reduce total interest.

 

When refinancing makes sense

Refinancing may be of particular interest when any of following apply:

  • Your credit score has improved – A better score may enable you to qualify for a lower interest rate and APR.
  • Market rates have fallen – Even a drop of one or two percentage points could result in a decent saving.
  • You didn’t get the best deal to start with – Refinancing with a lender such as RoadLoans may give you better terms than you got originally.
  • Your financial situation has changed – A change in your budget could make a lower monthly payment your priority. Alternatively, you may have the means to pay off the car quicker with a larger payment.

Whatever your situation, use a refinance calculator to get a better idea of how refinancing adds up. RoadLoans’ online calculator lets you enter the details of your current loan along with the terms of a new one, and adjust the parameters as you go. Once entered, it will show you the difference between the current and new monthly payment, total interest charges and any potential savings.

Here are a couple more things to consider as you calculate a refinance:

  • Time remaining on your current contract – Interest charges typically decrease over the course of a loan so, if you’re a good way into your contract, any savings may be limited.
  • Prepayment penalties – Some lenders will charge a prepayment penalty for paying off the loan early. If you’re subject to such as penalty, compare it to your savings to see if refinancing still makes sense. Auto loans from RoadLoans come with no penalties for an early payoff.

 

Enjoy easy auto refinance

Refinancing a car loan can achieve a range of goals, and is often an easy way to save money or accommodate a change in circumstances. Even if you’ve recently taken out a loan, there’s no waiting period before you can apply to refinance. At RoadLoans, we offer a streamlined process that starts with a short, online application and instant decisions.† Your vehicle must be seven years old or newer, have fewer than 105,000 miles and a refinance amount from $5,000 ($6,000 in California, $6,001 in Massachusetts) to $75,000. If approved, all you need to do is complete and return your loan forms, and let us handle the rest.

Apply for refinancing online.

 

* These statements are merely informational suggestions only and should not be construed as legal, accounting or professional advice, nor are they intended as a substitute for legal or professional guidance.

RoadLoans is not a credit counseling service and makes no representations about the responsible use of or restoration of consumer credit.

† RoadLoans does not accept refinance applications from Santander Auto Finance and Chrysler Capital customers.

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