You may have thought about the idea of refinancing your auto loan to a lower rate. After all, you could be saving a large chunk of money every month on payments with a reduced interest rate. Refinancing a loan, whether it’s a mortgage or auto loan, can have great financial benefits.
With that being said, here are some of the top myths we will debunk on refinancing an auto loan:
Now is Not a Good Time to Refinance
With banks being more strict on borrowers since the economic downturn of 2008, many people think that right now may not be the best time to refinance. However, at this time, borrowing money is very inexpensive.
Lenders and banks can borrow money at a much lower cost than before, which can mean additional savings for you. Try to refinance your auto loan before interest rates rise again.
I Cannot Refinance Due to Negative Equity
It is common to have negative equity in an auto loan. Since vehicles can depreciate quickly, you might not be able to match the depreciation with your monthly payments. If you put a minimal down payment towards your car, you may be feeling the pressure of negative equity even more. Even with that being said, most lenders are more than happy to refinance loans higher than the value of your vehicle.
My Credit Won’t Let Me Get Refinancing
This is completely false. Bad credit situations can happen to almost anybody. If you have bad credit now, you can speak to your potential lender about how you have been making efforts to make all your payments on time.
If you have a stable income and residency, your chances of getting approved for a refinance are much higher. Although you may get a higher interest rate than a borrower with good credit, you could still potentially save a large amount of money through refinancing. You can check your credit score for free here.
I Can’t Afford the Fees
Unlike other types of loans, most refinancing lenders offer to refinance at no cost. If you decide to refinance your vehicle, you may have to pay a very small fee to the DMV to change the title status/holder of the vehicle. However, you could be saving more than enough money to cover this small fee.
Refinancing your auto loan is a fantastic way to save big. Lenders make it easy for consumers to apply for refinancing. If you haven’t already, take some time to find refinancing lenders online who can possibly help you save on your auto loan payments.