The first thing you should do in deciding if a car refinance loan is something you should consider is to check the documents on your existing car loan. You will want to be sure that there is not any penalty for prepayment and that the interest on your auto loan is not based upon "The Rule of 78s." Most loans today are simple interest loans so I would be surprised if your loan wasn't based on this calculation method. However, loans that use the "The Rule of 78s" method of calculation basically collect 75 percent of the interest due on the note during the first 50 percent of the loan's term. Very few lenders issue loans under the rule any more, but you still need to check.
The primary objective of a car refinance loan is to lower your monthly payments or reduce the amount of interest you pay on the loan. This can be accomplished by lowering the interest rate on your note, extending the term of the note or some combination of the two. One of the most common reasons for a car refinance occurs when someone accepts expensive dealer financing and then finds out they can get a much better rate at their bank or credit union. In fact many times the bank or credit union will give the borrower the new car rate if the vehicle was purchased within the past 90 days. The financing of your vehicle is one of the largest areas of dealership profit so securing your loan outside of the dealership is usually the smartest financing choice for you. Even if you don't get the financing up front and you end up using the dealership to finance your vehicle purchase, you can still refinance and in most cases get lower car payments.
A car refinance loan may be in order if your credit score had a few dings when you purchase the car but now it has improved. The better score may allow you to shave several points off the interest rate and get a longer term, dropping your monthly payment considerably. Most consumers improve their credit scores after making 5-6 payments on time on their vehicle. It doesn't take much improvement in credit score to qualify for a lower interest rate. Many consumers just refinance to lower their payments and others are more interested in lowering their current interest rate.
The bottom line being if you are considering a car refinance loan you need to do your research before you sign on the dotted line with a new lender, be sure that you are in fact saving money with your car refinance. Check online for lenders offering this product. It is online where you will typically save the most on your auto refinance loan. You can also find useful tools like car loan calculators and other helpful resources online.
Senin, 19 Desember 2011
Langganan:
Posting Komentar (Atom)