A car is a must for every home today and
most of us look at auto loan refinancing when you want to keep the finances on
track. This option seems to be appealing
at times but, you should always have a close look towards the benefits and
drawbacks of auto loan refinancing to know if it a good idea for you. Car loans
are short in tenure when compared to home loan and refinancing auto loan
refinancing is not hectic as refinancing home loan so, the option is being considered
by many individuals today to keep their finances on track. Go through pros and
cons of auto loan refinancing will help you take an educative decision about if
the auto loan refinancing is the right alternative for you.
When should you go for refinancing a car loan?
Want to take the advantage of lower interest rates
Interest rates on home loan and car
loans are lowest in their history. If you have availed a car loan when you had
a low credit score or when you did not establish any credit score, you might
have fetched auto loan at the higher interest rate. Most auto loan providers
allow you to refinance your car after a period. It is advisable to refinance
auto loan after two years of availing the car loan so that you might have
established good credit score enough to fetch the car loan at the lower
interest rate.
Get shorter loan term
Most of them plan to take a car loan in
the early stages of the career. Lower income during these periods may probe you
to go for a longer tenure. If you are looking to shorten your loan term as the
income increases, refinancing an auto loan is a wise option. Refinancing car loan not only helps you
reduce the loan term and repay it faster but also gets you the loan at lower
interest rate if your credit score is good. Your EMIs may higher than the
earlier but you will be able to close the loan in no time.
Increase your cash flow
You can also consider refinancing auto loan to
increase your cash flow when the sum of the loan that is due for the payment is
lower than the current value of your car. If your current car value is 250000
and loan amount due is 100000, you can refinance car loan for 200000 to
increase your cash flow. However, you should consider the fact that your loan
tenure will be extending and you will be paying more to the lender in terms of
interest.
Lower EMI payment
Sometimes choosing to go by higher EMIs
to close the loan faster may turn into hurdle monthly expenses. If you are one
among them facing such issues or want to lower your loan EMI for any other
reason, you can consider refinancing auto loan. You can ask the lender to
reduce your EMI by increasing your loan term. A caution here is to check the
total amount of interest you pay towards the car loan when you increase the
loan term.
Change the lender
The term of the auto loan may vary from
one to seven years. If you are taking the auto loan beyond the period of two
years and want to change the loan to Auto Equity Loans Wilton Manors to benefit lower interest rate or flexible
repayment terms, you can consider refinancing auto loan.
Why not go for refinancing an auto loan?
Pay more interest
When you refinance auto loan for a lower
interest rate with extended loan period, there are chances that your overall
interest payment for the loan turns to be more. It does make sense to use the
math to ensure that you are having the right balance between the loan tenure
and the lower interest rate when you consider car loan refinancing.
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