refinancing a car loan

refinancing a car loan

Refinancing A Car Loan

This resource is part of the Innovative Funding Services (IFS) auto finance Library. How Can Car Refinancing Affect Your Finances? When you refinance a car, you replace your current car loan with a new one of different terms. In practice, auto refinancing is the process of paying off your current car loan with a new one, usually from a new lender. This process can have varying outcomes for car owners. So, before refinancing, make sure you understand your motivations for refinancing and the outcomes you are seeking. Most people refinance to save money. But this goal can take multiple forms. Some wish to lower their monthly payments. Others want to reduce their interest rates or adjust their loan term lengths. Still, others have more personal reasons to refinance, such as removing co-signers from their loans. No matter what is motivating you to consider refinancing your car, it is important that you understand the possible outcomes of refinancing a car. Is auto loan refinancing right for you? IFS offers up to 100% financing for credit scores ranging from 525-800+. Refinancing may help you… Lower your interest rate Lower your monthly payment Remove someone from your loan Apply Now Questions? Call 512-735-5839
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Refinancing A Car Loan

This resource is part of the Innovative Funding Services (IFS) auto finance Library. How Can Car Refinancing Affect Your Finances? When you refinance a car, you replace your current car loan with a new one of different terms. In practice, auto refinancing is the process of paying off your current car loan with a new one, usually from a new lender. This process can have varying outcomes for car owners. So, before refinancing, make sure you understand your motivations for refinancing and the outcomes you are seeking. Most people refinance to save money. But this goal can take multiple forms. Some wish to lower their monthly payments. Others want to reduce their interest rates or adjust their loan term lengths. Still, others have more personal reasons to refinance, such as removing co-signers from their loans. No matter what is motivating you to consider refinancing your car, it is important that you understand the possible outcomes of refinancing a car.
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Refinancing A Car Loan

Should I refinance my auto loan? An auto refinance loan may be right for you if you: Feel like you’re paying too much for your current auto loan balance each month Have a better credit score since first financing your vehicle Want a secured loan and a potentially lower rate If I have a lower credit score, can I still refinance my car loan? Even if you have a lower credit score, you may still have options. Wells Fargo provides auto refinance options for customers with most types of credit. Is it easy to apply for car loan refinancing? Yes. It only takes a few minutes to apply and get a credit decision. A Wells Fargo Auto Finance Specialist will contact you shortly after applying, and if approved, you may receive your loan the next day. See our checklist to prepare for your application. How does the auto refinance loan application process work? Applying is simple and only takes 5-10 minutes to get your credit decision. Apply online Discuss and select a loan option with a Wells Fargo Auto Finance Specialist Complete and submit your loan documents If approved, you’ll receive your loan quickly — typically within a day — and will be able to access your account 24/7 with Online Banking with Wells Fargo Online®.
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Refinancing A Car Loan

While the example above illustrates how refinancing can benefit a borrower, you should note that refinancing can have various impacts on a person’s finances. When and if you choose to refinance, you may or may not change the length of your loan, and your interest rate does not necessarily have to change – although most of the time it will. Most of the time, refinance customers want to at least reduce their monthly payments, but sometimes customers have different priorities when refinancing. The point is that every car refinancing deal is different and every refinance customer has a personal reasons to refinance. For this reason, you can benefit greatly when you work with an auto loan company that takes the time to learn about your needs and will match you with a better car loan than you already have.
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Refinancing A Car Loan

Notice how the car loan balance with refinancing line (in orange) falls at a slower pace over the loan term than the car loan line without refinancing (in blue). Because, in this example you extended your loan term, you pay less of your principal each month and have more time to accumulate interest charges. As a result, you pay off your loan at a slower pace than before refinancing. However, your new interest rate of 3% is sufficiently below your old interest rate than in the end you cumulatively pay less interest charges than if you had not refinanced.
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Refinancing A Car Loan

Pretend that one year ago you purchased a car for $20,000. A lender loaned you this amount at 6% interest (APR) to be paid back over 48 months. Now, 12 months later, you decide to look for refinancing, because you would like to reduce your monthly payments. So, using an auto loan service, you connect with a new lender that will pay off your old lender and give you a new loan. This lender offers to give you this loan at a 3% interest rate (APR) with a loan term of 48 months. Effectively, by refinancing with this loan term, you will be paying for this car for 60 months, because you already made 12 monthly payments and you are signing up to pay for your new loan for another 48 months.
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Refinancing A Car Loan

When you refinance a car, you replace your current car loan with a new one of different terms. In practice, auto refinancing is the process of paying off your current car loan with a new one, usually from a new lender. This process can have varying outcomes for car owners. So, before refinancing, make sure you understand your motivations for refinancing and the outcomes you are seeking.
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Refinancing A Car Loan

Most of the time, people seek car loan refinancing to lower their monthly payments. This priority is understandable because monthly car loan payments can have an immediate impact on a household’s monthly finances. However, your monthly payment should not be your only consideration when refinancing as the sections below describe.
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You have two ways to lower your car loan monthly payments. You can get a lower interest rate, you can extend your loan term, or you can do both. Usually, the best way to lower your car loan payments dramatically is to extend the number of months over which you pay for your car. However, when you extend your loan term, you may end up paying more for your car in total than you would without extending it. Still, if your lender allows you to extend your loan term and gives you a lower interest rate, you may both lower your monthly payments and pay less in total for your car. The example below will illustrate how this outcome can occur.
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By now, you should be able to tell if you’ll save money by refinancing your car loan. In some cases, interest rates might also have fallen since you took out your current loan. If that happened, you’re in luck: There might be even greater savings, and it’ll be very clear that refinancing is for you.
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Refinancing your car loan is faster and easier than you think. You need a history of six to 12 months of steady, on-time payments to make a car loan refinance possible and worthwhile. You can apply to refinance online, and there’s a good chance you’ll be able to lower your monthly payment. See below for tips on how to get started finding your best car loan refinance.
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Most people refinance to save money. But this goal can take multiple forms. Some wish to lower their monthly payments. Others want to reduce their interest rates or adjust their loan term lengths. Still, others have more personal reasons to refinance, such as removing co-signers from their loans. No matter what is motivating you to consider refinancing your car, it is important that you understand the possible outcomes of refinancing a car.
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If you’re using NerdWallet’s auto loan calculator, the right-hand column will show you the total amount of money you’ll spend over the length of the loan. To really motivate yourself, subtract this amount from the balance of your current loan. Hopefully, you’ll be saving a lot of money by refinancing your auto loan.
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*Annual Percentage Rates, terms of loan, and monthly payments presented are estimated based upon analysis of information you entered, your credit profile and/or available rate information from lenders. While efforts have been made to maintain accurate information, the loan information is presented without warranty and the estimated APR or other terms presented do not bind any lender. Lenders generally have a range of available APRs (for example, a lender’s range might be 2% to 24%) and only borrowers with excellent credit will qualify for the lowest rate available. Your actual APR will depend upon factors evaluated at the time of application, which may include credit score, loan amount, loan term, vehicle information, credit usage and history. All loans are subject to credit review and approval. Additionally, model year, loan-to-value, minimum loan balance mileage, income, debt, etc. restrictions may apply. When evaluating offers, please review the lender’s Terms and Conditions for additional details.

Published on Mar 24, 2017 | Under Car | By michael ellis
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