Reduce Your Used Car Loan: Used Car Refinancing Simplified

If you are like many people, you may have purchased a used car at a high interest rate. Perhaps your credit was bruised at the time of your used car loan. Regardless of the reason, refinancing your used car loan will save you money. If this sounds like you, you don't need to settle on the high interest rate on your used car loan.

 

When Should you Consider Refinancing Your Used Car Loan?

  • When your financial condition and credit score has improved.
  • When you are having some challenges making your monthly loan obligations.
  • When you are paying high interest rates and finance charges.
     

One of the first things you should do is watch the interest rates. When rates drop at the Federal Reserve this can translate into lower payments for you.  You primarily have two opportunities to reduce your monthly payment:

  1. Lower the interest rate
  2. Spread out the repayment period

These two strategies together will assist in creating lower used car loan payments.

Finding a Lender Online

The Internet is a critical source to finding a lender to refinance your loan. Most online lenders have short and concise applications that take no more than 5-10 minutes to fill out. There are numerous players in the refinancing arena. Keep in mind, especially when you have lenders compete for your loan, that most will check your credit report. If you are just recovering from a poor credit history every credit report generated will lower your credit score. Typically, every inquiry will lower your score between five to six points. Before you begin your search know what your credit score is. If you know your situation well before credit history is pulled you can present your scenario to a prospective lender. Therefore, you need not be concerned about dropping your score prior to entering into discussions.

Don't rule out your existing lender when considering refinancing. The refinance business is very competitive. If you are able to demonstrate competitive bids to your lender you may be able to negotiate a better deal. Competition can sway even the savviest lender into offering you a good deal. In the worst case scenario, if it's unlikely that you will be able to reduce your interest rate, you may be able to refinance for a longer period. This type of loan modification, while not the best for saving money, may reduce your monthly payments and help with your short-term financial goals.

 


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