If you’re like many Americans, your auto loan is one of your biggest monthly expenses, second only to housing costs. What you might not know is that auto loan refinancing can help you save money—in some cases, thousands of dollars over the life of the loan. Refinancing your car loan can help you get better terms, lower your monthly payments, purchase GAP insurance, and more.
Auto Refinancing Basics
Auto loan refinancing is the process of obtaining a new loan to replace an existing one, usually to help save money. As part of the auto loan refinancing process, a new lender that specializes in refinancing will pay off the remainder of your auto loan. From there, you make payments to the new lender based on a new loan agreement.
Reduce Your Rate and Save
When you first purchase a vehicle and sign an auto loan, you agree to pay a certain interest rate. The interest rate—usually written as a percentage of the total loan amount—represents an additional amount, on top of the principle, that you pay every time you make a payment on your loan. Ideally, you want the interest rate on your auto loan to be as low as possible.
If your interest rate was high when you first signed your loan agreement or if you’ve improved your credit score since then, auto refinancing can net you a lower interest rate. A new rate that’s even a few percentage points lower can make a big difference in your monthly payment and the total cost of your car.
Adjust Your Terms
Auto loan refinancing can also help adjust your loan term to something that better suits your financial situation. For example, a long-term loan with a low interest rate can lower your monthly payments, but the loan will take longer to pay off and you’ll end up paying more in interest than you would have otherwise. A short-term loan with the same interest rate, in contrast, will have a higher monthly payment but a lower overall cost.
Take the Next Step with Gravity Lending
The best way to save money on car refinancing is to work with an expert who can help you navigate the various options on the market—not just the terms they’re offering at the dealership. At Gravity Lending, we help our clients determine their best options for refinancing and interest rates, and we may also be able to secure other, more favorable terms, such as no prepayment penalties. We can even provide a complete auto refinance checklist to help guide you through the process.
Contact us to get started today!