What is Auto-Refinancing?
Auto-refinancing is said to hold when you change your decision about continuing a contract with your initial car loan financier and have chosen to initiate a new deal with another lender for reasons that will benefit you in the long run.
Several reasons could prompt you to take such a decision which may include lowering your monthly interest payments, reducing the overall loan amount/balance, or extending the contract period for flexibility.
Thinking about Refinancing your Car?
Yes? Then, you are on the right page! But let’s first get acquainted with what you may fail to understand or lose from auto-refinancing before dwelling on the benefit which actually brought you here.
Did you know auto-refinancing could be detrimental to your credit score? The extent to which it can affect your score could be so bad that recovery becomes impossible. That is likely to happen if you do not wait long enough to regain your score status before choosing to refinance your auto.
The Cons of Refinancing your Car
It is important to be aware of the consequences that may arise from taking the path of auto-refinancing. Therefore, it is a huge benefit to consider the following drawbacks involved in auto-refinancing. They include:
- Over-extension of Loan Repayment Period:
The only reason why most people boycott the idea of auto refinance is the prolonged lifespan of the new contract. Any other con is a result of this over-extension. So, weighing the benefits of the juicy package you have discovered would definitely supersede its drawbacks.
This may sound strange but this drawback is even a huge advantage in disguise if you look at it critically. Imagine how convenient it would be to have the opportunity to repay a loan to suit your monthly income and credit worthiness. Then it should be a relief to know that you can take as long as it will favor you to settle your debts.
- Age of Vehicle:
You should be aware now that old cars usually attract higher interest rates than new ones. Cars between the age range of 5 to 12 years are considered too old to fetch enough profit for the company in a situation of swapping for a different choice or replacement following an accident according to insurance policies. Therefore, be wise to check with the new lender before you refinance your auto to avoid any misunderstanding or regrets after signing the new contract.
Inform the new dealership of your vehicle age, model and preferred repayment terms before you approve any scheduled meeting or append your signature on supporting documentation. That will prevent any breach on your part when you realize that they are charging you extra above the rate you initially presumed was their standard charges for regular vehicles below 5 years old.
What is a Good Reason to Refinance a Car?
It basically points towards enjoying “Flexible Payment Conditions/Terms” which can be discussed in the aspects highlighted below:
- Reduced Interest Rate:
Having a very low interest rate to offset installmentally over the course of any contract is worth giving a try when compared with an existing contract term involving a higher rate. This is the first good reason why you shouldn’t shrug off the idea of refinancing your car.
A lot of car dealers gain enormous profit from the accumulated interests paid by their customers over time to boost sales and business transactions for the overall success of the company. Therefore, no lender would withhold from rendering their services to any client willing to strike a fair deal with them.
Provided the deal will favor both parties, you as the client must be ready to accept the moment you hear that the interest rate requested by the lender is within your financial capacity. Otherwise, it would do you greater benefit to remain with the present financier or continue with your previous contract conditions at the same company.
With a lower interest rate, consider yourself a business mogul/guru. You are on top of the game. Loan repayment becomes much more flexible for you because of your ability to make the best choice. Regarding this factor about low interest rate, you would need to first gather substantial information about all car dealers/lenders within your geographical location. Proximity to your residence matters because if you fail to weigh the cost of transporting the vehicle to your destination, you are as good as a reckless spender.
- High Drop in Monthly Payments:
This is another benefit also woven around the major reason for embarking on the “auto-refinance journey”: Flexible Payment Conditions/Terms. Aside from enjoying a favorably low interest rate, it would profit you to also enjoy offsetting your loan in meager installments. Although the contract period may seem longer than it was with the previous arrangement, it is best to opt for a less burdensome repayment package.
You may be thinking about how the total amount paid in the long run may also be higher than if you were to pay within a shorter period. Do not be perturbed because what matters is how you are able to manage your monthly income/finances. Your monthly budget and expenses must balance to avoid a financial strain on your savings and credit score.
Is it Worth It?
Absolutely! Because the benefits outweigh the drawbacks. Consider how much good it will do to your finances without you breaking the bank to just to service a car loan. You are able to meet your personal needs while being mobile without wasting resources excessively on car hire like uber. Infact, the funds that will go on commuting commercially or moving around via public means daily is enough to purchase an SUV outrightly.
Remember we take loans to give us the freedom to pay later and also enjoy the item/product even before we complete the payment. Hence, making an outright payment even if you have the ability to do so is not financially advisable nor a wise step to take.
Do it Now!
Why procrastinate when you can save yourself from financial stress? Take that bold decision and refinance your auto NOW!!!