Auto Refinance

An auto refinance involves transferring an auto loan to a new lender. After the new lender pays off the existing auto loan, the vehicle title is transferred to them. The borrower then makes payments to the new lender, beginning with interest, until the car is paid off.

Finding the Best Interest Rate

A consumer may have an auto loan with an interest rate that was good at the time they purchased their car, but is now less competitive. Auto loan refinance rates are currently at a historic low, so auto refinance can be worthwhile. Auto refinance loans offering the lowest interest rates can save consumers considerable money. Even a rate decrease of one percent can result in savings of hundreds of dollars in total interest.

Saving on total interest is the best reason for an auto refinance. However, consumers may use auto loan refinancing to lower their monthly payments. This usually requires lengthening the loan term and therefore increases the total money spent paying off the loan. However, if consumers strongly need to reduce their current payments and free up money in their budgets, car refinance may provide a solution. There are even options for those who want to refinance with bad credit.

A Solution When Money is Tight

Car refinance loans may also provide a solution for cash flow problems. If a vehicle has equity, or is worth more than the consumer owes on it, then a lender may provide a consumer a loan of its total book value. The lender then gives the consumer the amount of cash in excess of what the consumer owes. Cash-out auto refinancing is a great option for consumers who urgently need cash and have auto equity. Consumers may secure much lower interest rates through auto loan refinancing than through other loans for the same cash amount.

If a consumer owes more than a car is worth, then they have negative equity. Consumers with negative equity are called "upside down." This is a common situation, because cars often depreciate in value more quickly than consumers can pay for them. Car refinance may not be available in this case, as there is little incentive for lenders. If the consumer defaults, the lender will end up with a car that is not worth the amount of money lent. However, there are exceptions, and even “upside down” consumers may be able to find refinance loans by examining all their options.

Auto Refinancing Options

Auto refinance loans may not be worthwhile if a consumer has paid only interest and not yet on the principal of their current loan. This is often the case if the consumer has not had the loan for a long term. There is probably no benefit in auto refinancing in this situation, as the consumer will have to start over with a new loan for exactly the same amount already borrowed.

At our site, consumers can explore all of the current auto loan rates available to them far more quickly and thoroughly than they can visiting individual lenders. Take advantage of this convenience--start the process of your auto refinance by filling out the form on the top of the page!