Refinancing a Car to Lower Your Payments

Refinancing a car loan can help make your monthly car payment more affordable. When you take out a car loan, the most common traditional term is five years. Now, when you have been paying on the loan for two or three years, you pay down your balance. Let's say that the car was $20,000 when you first purchased it and after three years, you have paid the balance down to $10,000. When you refinance the loan, you are financing only $10,000 over five years. This will make your monthly payment much smaller and easier to handle. 

What to Consider

You have to consider your situation as a whole before making a decision. If you are only a year away from paying off the car completely, this would not be a good idea. Decide if you want to make payments for another five years before you do anything. 

Also, take a look at the rate and terms of the new loan. Get quotes from at least three companies to establish a fair rate and fees. Many times, because the payments are lower, we accept fees and rates that are too high. Be cautious and compare your loan before making a commitment.

 

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