Car Refinance

If you are thinking about car refinance, there are several factors to consider. As with any financial decision, it is important to be fully informed first.

What is a car refinance loan?
A car refinance loan pays off an existing auto loan with a new loan. It’s really quite simple: Your current auto loan and title are transferred to your new lender. You then simply make your car payments to the new lender.

When should you get a car refinance loan?
Ask yourself the following questions as part of the decision-making process:

1. Did you get your auto loan from the dealership? Although you may have gotten a great deal on the car, you probably didn’t get the best deal on the financing if you used the dealership. If your car is dealer-financed, that might be the first sign that car refinance is right for you.

2. Do you have an upside-down loan? An upside-down loan means that you owe more for your auto loan than the car is worth. Car refinance may be able to correct this situation. No one wants to trade-in or sell a vehicle and find out that the money given for the car won’t even cover the balance on the auto loan.

3. Is your interest rate high? Your interest rate may be higher than it should be, especially if you originally got your auto loan through a dealership. Also, rates may have fallen since you first got your loan. Using car refinance to get a lower rate is usually a good idea.

4. Is your monthly payment too high? If you get a lower interest rate through car refinance, your monthly payments should fall, too. However, avoid the mistake of stretching out the term of your auto loan. Although it may yield lower monthly payments, that is also the surest way to end up with an upside-down loan.

If all or even most of the above questions apply to you, then you may be a good candidate for car refinance.

If you have decided that car refinance is for you, then you must look into your options. A good place to start is at LendingTree.com where you can compare auto loan offers from up to four different lenders. That way, you can find a rate that you like and get a better auto loan through car refinance.

Sources: Lendingtree.com

Refinancing

Refinancing

Refinancing refers to the replacement of an existing debt obligation with a debt obligation bearing different terms. The most common consumer refinancing is for a home mortgage.

Advantages:
Refinancing may be undertaken to reduce interest rate/interest costs (by refinancing at a lower rate), to extend the repayment time, to pay off other debt(s), to reduce one's periodic payment obligations (sometimes by taking a longer-term loan), to reduce or alter risk (such as by refinancing from a variable-rate to a fixed-rate loan), and/or to raise cash for investment, consumption, or the payment of a dividend.

In essence, refinancing can alter the monthly payments owed on the loan either by changing the loan's interest rate, or by altering the term to maturity of the loan. More favourable lending conditions may reduce overall borrowing costs. Refinancing is used in most cases to improve overall cash flow.

Risks:
Most fixed-term debt contains penalty clauses (known as "call provisions") that are triggered by an early payment of the loan, either in its entirety or a specified portion. In addition, there are also closing and transaction fees typically associated with refinancing debt. In some cases, these fees may outweigh any savings generated through refinancing the loan itself. Typically, one only rationally considers refinancing if the potential for a substantial cost savings exists, or if there is a need to extend the loan due to weak cash flow or other non-recurring commitments.

In addition, some refinanced loans, while having lower initial payments, may result in larger total interest costs over the life of the loan, or expose the borrower to greater risks than the existing loan, depending on the type of loan used to refinance the existing debt. Calculating the up-front, ongoing, and potentially variable costs of refinancing is an important part of the decision on whether or not to refinance.

Sources: wikipedia