Posted by Brian Alisanne on Sunday, 8 September, 2019 05:32:49
How Does a Car Refinance Loan Work? Published on: 11/2/2016. Revised on: 10/30/2018. Whether your goal is to lower your monthly car payments or reduce the total interest you pay on your car loan, it's important you understand how refinancing your car loan works.
Now let's say your credit has improved, and so have interest rates on car loans. You could now refinance the balance of your car loan at 3 percent and lower your payments to about $445 a month for
Refinancing means that you pay off your current loan with a new one. People typically choose to refinance in exchange for a loan with better rates that'll lower their monthly payments and save them money on interest and fees over time. Many types of loans have refinance options, including mortgages, auto loans, student loans and personal loans.
Does your current lender subject you to a prepayment penalty for paying off your loan early? Bank of America car loans don't have such penalties, but if you're subject to one, do the math: If the amount you save by refinancing is significantly greater than the penalty, refinancing may still be a good idea.
Refinancing a car loan involves taking on a new loan to pay off the balance of your existing car loan. Most of these loans are secured by a car and paid off in fixed monthly payments over a predetermined period of time — usually a few years.
Shopping for a better auto loan — and refinancing your current car loan — will probably save you money and can be relatively painless. Refinancing your auto loan can make sense under several scenarios. For instance, if your credit has recently improved, there's a good chance you can lower your interest rate and monthly payment.