Refinancing an auto loan can be one of the best things that you can do for your personal financial situation. Doing so has many potential benefits, including the ability to reduce your interest rate, reduce the overall amount of money that you pay in interest, or reduce your monthly payments. However, doing so is not necessarily right for everyone.
What is an auto refinance?
According to Lantern by SoFi, “The goal of auto loan refinancing is to secure a new loan with better rates or terms than your previous loan.”
In other words, an auto refinance means that you shift from one lender to another. In doing so, you may be able to do one of a few things:
- Alter the timeframe of the loan, extending it or shrinking it. This means that you may be able to reduce the time it takes to repay your loan or extend it, which may lower your monthly payments.
- Lower the interest rate on your loan, allowing you to either pay the loan off faster or pay less in overall interest to your bank.
Reasons why I should refinance my current auto loan
There is no question that refinancing an auto loan can be a good thing. Doing so can allow you to achieve one of many goals:
- Save money on interest payments.
- Reduce the number of your monthly payments.
- Pay off your loan faster.
How long does an auto refinance take?
This depends on the speed of your bank or financial institution. Generally speaking, it will take between 7-15 days before such refinancing is completed. It does involve a hard credit check in order to see if you qualify, and then paperwork must be processed accordingly.
Possible outcomes when refinancing your car
The possible outcomes depend on your end goals and if you have extra money to put towards a loan. For example, you could get a lower interest rate on your loan. This would mean that you could reduce your monthly payments or pay the same amount but put more money towards the principal of the payment, thus enabling you to pay your loan off faster. You could also alter the timeframe in which the loan was due, extending it out. This could mean lower monthly payments, but that would also likely mean more money paid towards interest costs. This may be appropriate for your personal financial situation, however.
As you can see, refinancing your car has a variety of potential benefits, and depending on your financial situation, doing so can be highly beneficial for you and your wallet. It is something that you shouldn’t do at the spur of the moment, and it’s a time-consuming process, so you will want to be sure it is right for you before you finalize any auto finance arrangements. However, there is no question that it can be highly beneficial for a variety of financial circumstances.
