Do you currently have a loan on your vehicle, and you are looking into refinancing it to lower your monthly payment? Here are some things that you need to know before you decide on an auto loan refinance.
A Vehicle Refinance Is Like Starting Over On Your Loan
If you have gotten a home loan refinance before, you are likely aware that the process basically starts over on the length of the loan. If you have a 5-year auto loan and refinance to another 5-year loan, then the process will start over as if you bought your car all over again. The amortization schedule starts at the beginning again, so those initial months you will be paying more in interest than in principal.
You do have the option to get a loan with a shorter term if you wish, though this may not necessarily lower your monthly payment. If the term is significantly shorter than your previous loan and you have a large balance remaining, it's possible that your payment will go up.
A Vehicle Refinance Price Is Based On The Remaining Balance Owed
When you refinance a vehicle, know that they base the purchase price of the vehicle based on how much is left on the loan. If you bought a $10,000 vehicle and have $5,000 left to pay, then your refinance is based on the remaining value owed of $5,000. Since the loan is starting over, a loan with a similar term is going to drastically reduce the monthly payment on the loan.
A Vehicle Refinance Can Be With A Different Lender
Know that you do not have to refinance with the same lender that the original loan was from. You can refinance with a new lender if that is what you want to do. Just make sure that you fully understand the terms of the loan, because a different company may have different terms that you are unfamiliar with.
A Vehicle Refinance Can Remove A Co-signer
If you needed to get a co-signer when you originally got your vehicle loan, and now you are able to get the loan on your own and remove the risk from your co-signer, know that this can be done with a refinance. The vehicle refinance will pay off the old loan and start a new one, so the co-signer is free and clear of any responsibilities associated with you getting the original loan. It's treated as if you paid for the original loan in full.Share