What You Need to Know About Your Car Loan Refinance

Refinancing your car loan can be daunting business, and it’s hard to get trusted advice on your options and how it will affect you. Before you refinance car loans, read our industry wide advice on what you need to know in Australia to ensure you’re getting the best possible deal, so that you’re benefiting from the record low interest rates as much as you can.

When you refinance, you are essentially replacing your current loan for another one, therefore paying off the initial loan with a loan of better value for you. This may be because you wish to lower your monthly payments, or reduce your interest rate. Refinancing can also be a viable alternative to make changes to your loan term, giving you a new loan where you can amend the term of your loan, or to add or remove a co-signer with the commencement of a new contract.

To put it in real life, imagine buying a car one year ago for $10,000. You have a 48 month repayment term, at 6% interest. However, you are now hoping to reduce your monthly payments, so you approach a lender who can pay off your loan for you under the premise of a new loan with them. This lender can see some serious improvements in your credit score, and offers you a loan term of 48 months, at half your current interest rate, 3%.Now, your loan has been spread out over another 48 months on top of your 12 months, giving you a total term of 60 months. 

Your new loan will pay out your old lender, then give you another two years at a lower interest rate, overall saving you money as you are paying off a smaller sum with a lower interest rate.

Even if your monthly payments don’t drastically change, by taking the remainder of your loan into a refinance option and selecting a shorter term, you’ll be saving money with the lowered interest. 

While your current monthly rate may sound reasonable, when the total sums are put side by side you may start getting that ache in your back pocket.

Refinancing your car loan is a lot more straightforward than refinancing your mortgage, and is a great option for people in a few different scenarios. For example, if interest rates have dropped since purchasing your vehicle, even by only a few percentages, you could save a large sum of money over the lifetime of your loan. Likewise, if your credit score has improved and you are a more reputable customer, your lender may be able to move you into a lower interest rate for your refinance option, so you should check your score before inquiring about refinancing.

Refinancing is a case-by-case alternative, and should be treated with caution if the new loan comes bundled with fees that would detract from your savings. Likewise, make sure that your refinancing option will trim down your repayment term. Unless you are genuinely concerned about upcoming payments, avoid refinancing into an option with extends your overall loan.

Auto-refinancing is quick and easy, so talk to your lender about an option for you. At Allcredit, we work alongside people from across Australia to find the best refinance car loan for their needs and budgets. Our friendly staff can find you an alternative to save you money, and get your car loan off your back in record time.