Auto Loan Refinance With Bad Credit: Reasons Why It is a Wise Move
Looking to secure auto loan refinance with bad credit might seem to be a desperate act. But such a move has a lot of advantages that can make life a little easier for everyone.
The advantages that come with refinancing an auto loan are many, with lenders and borrowers both enjoying the fruits of a re-negotiated deal. From lifting some of the financial pressures to lessening the likelihood of default, everyone wins through refinancing.
The fact is that refinancing a bad credit auto loan can lead to a more secure future for all concerned, which is an outcome that everyone wants.
How Refinancing Works
The basic idea of refinancing is that the repayment schedule and rate of an existing loan can be replaced by another more manageable one. When seeking an auto loan refinance with bad credit, it might seem that the lender will dictate the terms, but in fact it is generally more cooperative in nature.
When an auto loan is taken out, and the desired vehicle is purchased, the repayment schedule clicks into action. But by refinancing an auto loan after a period of time, extra funds can be secured while also lowering monthly repayments.
For a loan of $25,000, for example, the monthly repayments may be as much as $550 over 4 years, or 48 months. But after 24 months, as much as $12,000 may have already been take off the principal.
By refinancing the bad credit auto loan the borrower can access perhaps $5,000 of what has already been cleared and use it for other purposes, while the repayments can be less than the existing repayments, thereby freeing of more funds.
This is accomplished by taking out a loan to cover the remaining principal and the additional $5,000, or $18,000 in total. Over 48 months, this might mean monthly repayments of just $425.
Timing is Important
When it comes seeking an auto loan refinance with bad credit, timing is very important. This is because there are a number of factors that need to be in place in order for the full benefits to be enjoyed. For a start, there needs to be a sufficient amount of the original principal repaid, otherwise nothing is really saved when refinancing an auto loan.
Another factor is that interest rates should be less than the original rate. Otherwise, refinancing the bad credit auto loan will only mean replacing a debt with either the same debt or a larger one.
Of course, it is always possible to negotiate a lower rate than that advertised when looking for auto loan refinance with bad credit. However, it is a good idea to keep a close eye on the how the interest rates are moving, then moving as the rates reach a low.
Benefits of Refinancing
It might seem that refinancing an auto loan is not the most purposeful move, but in fact there are many benefits. The fact that some or all of the principal sum repaid can be accessed again means that other debts can be dealt with.
The $5,000 raised by refinancing the bad credit auto loan in our example can be used to clear the credit card debts, or pay an unexpected hospital bill, or used to pay college fees.
Meanwhile, the lower monthly repayments means that $75 is free each month to help with a personal loan payment or to cover utility bills. The fact is that auto loan refinance, with bad credit or not, is beneficial in many ways.
Source: Free Articles from ArticlesFactory.com
ABOUT THE AUTHOR
Devora Witts is a certified loan consultant who helps people get approved for Loans for People with Bad Credit and Bad Credit Mortgage Loans. To get aid with your financial situation you can visit her at http://www.badcreditloanservices.com