A person generally buys a car from a car dealer; the car purchase is financed by taking a loan arranged by the dealer or the car company which has tied up with a car loan lender. The car buyer would then regularly pay his car loan installments. At some point of time, he may feel that the terms of the loan are to his disadvantage and he may start looking out for car refinance loans.
What are Car Refinance Loans?
When a car owner replaces an old car loan with a new one, the new loan is called a car refinance loan. The old loan is cleared with the help of the new loan amount.
Situations in which Car Owners opt for Car Refinance Loans
- When the car owner bought the car, interest rates may have been high. So the car loan he took would be carrying a high rate of interest. Interest rates have now fallen and he finds that if he had taken the loan now, he would have saved a lot on interest. He now wants to cut his interest payments by closing the old loan and taking a new one at a lower interest rate.
- The car owner, who is still paying off his car loan, may find that there are other car loans with more attractive terms. The current loan may have been arranged through the car dealer and the car buyer may not have studied other available loans at that time. He now wants to take car refinance loans with better terms.
- When the car owner had bought the car, his finances were quite good. But now, they have taken a turn for the worse. He may have lost his job or may have incurred other debt and is finding it difficult to repay his current car loan installments. So he wants a cheaper loan which would be easier to pay back.
- The car owner may have had a bad credit score when he bought the car taking a loan. The low score would have meant that the loan carried a high interest rate and other adverse terms. But his credit has improved since and he is confident that he could now get a loan with better terms. So he wants to opt for car refinance loans.
Before taking car refinance loans, the car owner needs to find out whether he would indeed save by taking a new loan and whether the saving is significant. The following questions will help him find the answer:
- Does his current loan carry a high interest rate compared to the car refinance loans currently available?
- Does he have to pay a penalty for closing the current loan?
- How many installments are pending on the car loan?
- Has he paid points that are prepaid interest, when taking the loan?
- Is the value of the car less than the amount he owes on the current car loan, in which case he would have to bear the difference?
Online Car Refinance Loans
Banks generally don’t grant car refinance loans. The best option would be to conduct an internet search and select online lenders of car refinance loans.
Advantages of taking online Car Refinance Loans
- A person wishing to take a car refinance loan could look for a suitable lender at leisure. He can study the terms of each lender in detail and select a loan which offered the best terms.
- The borrower could save on the fees by applying for an online loan.
- The borrower would not have to depend on a salesperson and could get any information he wants directly from the company.
Procedure for applying Car Refinances Loans
A person wishing to take online car refinance loans would have to enter the following details on the lender’s site-
- Borrower’s personal information
- Current loan details
- Current income and employment details
- Kind of loan required
The lender would grant a car refinance loan if the information met his lending criteria.
Car refinance loans help car owners who are stuck with high interest loans. Taking a refinance loan would allow him to close the current loan and take a new one with better terms.