How can refinancing your auto-loan help you or hurt you

If you're wondering whether to refinance your auto loan or not, it helps to know how the pros and cons of this move. In this article find everything you need to know. 

Auto lenders have started offering longer car loans so that consumers can borrow more with a lower monthly payment, to make up for the rising cost of new and used cars. But borrowing too much or extending your repayment timeline can make you wish you had a different auto loan

So read on to learn the advantages and disadvantages, and then make a careful decision. 


Advantages


You could obtain a lower monthly payment
It's possible refinancing your car loan could secure a lower monthly payment that might make it easier to stay on top of your living expenses and other bills.

You could get a much lower interest rate
By refinancing, you might be able to qualify for a lower interest rate, which could save you a lot of money over the life of your loan. 

Tap into any equity you have
Refinancing your auto loan can also help you tap into any equity you have in your car. This can be of great help if you need money for emergencies or want to consolidate debt at a lower interest rate.

Disadvantages

You might extend your repayment timeline
Paying less each month is of great help if you are in debt, but remember that this will mean paying for more time, which can create unintended financial consequences later on. 


You may pay more interest over the life of your loan
Before you refinance your auto loan, make sure you run the numbers with an auto loan calculator to compare total interest costs. By paying less each month or securing lower rates today, you may wind up paying more interest on your loan due to a lengthier timeline.


Refinancing comes with fees
Finally, don't forget that refinancing your car loan isn’t free. Fees for doing so can include an application fee, an origination fee, and an auto lien transfer fee, and you may even be charged prepayment penalties that will come into play if you refinance your loan. 

Conclusion

Paying lower interests or monthly payments sounds like a great thing, but we’ve already gone over the consequences of doing it, so make sure you run the numbers before you move forward.
 

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