When buying a new car, we get so excited about selecting the right car and getting a loan based on the monthly payment we can afford. We may ponder on the how long its going to take to pay it off, glance at the interest rate and move on. As long as the payments are within the budget and the credit is approved, we sign on the dotted line, take the keys, get the insurance lined up, hop in the car and bask in that new car scent for a few months.
Months, maybe a year or two later, for some reason or another we stumble across the loan papers and realizing we're paying 16%, 18% or even 21% interest over 7 years. So what can you do about it? Sure you signed the loan papers, but you're not stuck for the long haul.
Consider refinancing your car loan. With auto loan refinancing, you may be able to save yourself some money. Shop around. You may be able to find a much better deal than the one you have.
But this time, you're not going to focus on the monthly payment. Be careful to consider all the terms:
- Compare interest rates for the car loan. Review your current loan agreement to find out the rate you're currently paying.
- Compare the loan term. Watch out for this one. Keep in mind that you're taking the current balance and spreading it over a new term. If your current car loan term is 7 years and you're already 2 years into the loan, consider how much longer you want to pay it off. If they take the current balance and spread it over another 7 years, surely your monthly payments are going to be lower. But that's like having a 9 year car loan (2 years from the first car loan, and 7 years for the refinance car loan). I don't think that's what you're after, unless you're really in a financial bind. Instead, ask for a term close to or shorter than the number of months you have left on the loan.
- Refinance Car Loan Fees. Ask the lender if there are any fees involved with the refinance. The fees may be added to the loan balance or they may require you to pay them upfront. If you're shopping around, be sure to compare the fees from one company to another.
Have you been in a good or bad car loan deal? Share your experience. I'm sure it could help someone.