Why to refinance your car loan

By Admin | Posted in Auto Loans & Financing News, How To on Thursday, April 28th, 2011 at

Drivers in the market for auto loans have a wide variety of sources to choose from when attempting to secure financial assistance. Whether they go to a bank, credit union or the dealer themselves, getting a loan is a pretty simple process, even for those with poor credit.

If you've already got a loan, however, you should keep in mind that it's always possible to refinance your loans and receive more favorable terms. The term "refinance" can conjure up images of mountains of paperwork for some people, as the term is typically associated with the mortgage industry. Contrary to popular belief, however, refinancing in the auto industry is much, much easier.

Refinancing can be very useful for drivers with bad credit. For example, if you have less than stellar credit, you'll slowly but surely build your score as you make the payments on your car loan. As your score rises and negative marks fall off your credit report, you could end up with a much better score down the line. This is where refinancing can be really helpful.

Take a five-year auto loan as an example. Good payments over the first two years will likely repair your credit score substantially, at which point you can begin shopping for refinancing options. The terms that are now available to you will likely be a big step up from the previous interest rates, meaning you'll be able to save a boatload of money for the final three years of the loan.

Refinancing is still applicable even if rates haven't gone down or your credit score hasn't improved. If you feel like you're spending too much money paying off your car loan each month, you can actually lower your monthly payment simply by extending the terms of the loan. By adding an extra year or two, you'll end up with more money each month.

Finally, choosing to refinance can essentially serve as a "do-over" to the initial loan. Dealers make a lot of money off of their financing departments, and some can be less-than-reputable, offering inflated interest rates or unfavorable terms. If you feel like you've been taken advantage of, refinancing can ensure that you get a much more reasonable rate.

When you've chosen a vehicle and are ready to talk financing, consider New Jersey State Auto Auction. Not only do they offer a wide variety of cars for sale, but they offer trustworthy auto loans at competitive rates and work with borrowers with all types of credit scores.
 

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