Car Loan Refinancing
If you have at one time in your life purchased a home on a mortgage or a loan, then you probably heard of the term refinancing. In home mortgage, refinancing is the process of using a loan to pay off your current loan. Simply put, it is when you pay off one loan with another loan. Of course, refinancing is not as simple as that but once you get the gist of it, you’ll know what I’m talking about.
Refinancing is one of the best kept secrets in the finance industry. Through this method alone, you can save yourself a lot of trouble and some cash to boot. Home refinancing has been around for a long time now and a lot of people are actually practicing it as a way to save money on their loans. However, despite the benefits of refinancing a home loan, many people still balk at the idea of car loan refinancing. This is especially true among those who have a less than perfect credit rating to back them up.
So what exactly is car loan refinancing? Car loan refinancing is the same as refinancing your home. In car loan refinancing, your current car loan is paid off using the money you borrow on a refinancing car loan with a different lender with lower interest rates. Again, like in home refinance, this is beneficial since car loan refinancing can make your monthly car loan payments lesser. With lower interest rates due to car loan refinancing, you could pay off the balance of your current car loan in a shorter period of time.
Very few people comprehend the time value of money. Some remain blissfully unaware that the longer you pay for a loan, the bigger money you spend on interest charges. Let’s say that you acquired a 60-month loan for $16,500 on a new Honda Accord and let’s assume that your credit is poor. Your car dealer manages to get you approved at 21% APR for that loan and thus your monthly payments are $446.38. By the end of the loan term, you would have paid $10,282.83 on interest charges alone. Now, if you chose car loan refinancing with another lender at 6% APR after the first few months, your monthly payment would have been $318.99, allowing you to save as much as $7,643 on interest charges.
The years 2001 and 2002 saw a record number of homeowners refinancing their homes and saving thousands of dollars. Today, many car owners are beginning to realize the benefits of car loan refinancing. With interest rates steadily dropping, car loan refinancing is fast becoming a trend as more and more people realize how you can save thousands of money by car loan refinancing.
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