When is Refinancing Your Car Loan a Smart Choice?

It may seem to you that your current car loan is too onerous and that you are overpaying. The obvious solution would be to refinance your car loan and get better conditions. But if you decide to do so, are there refinance car loans offering better conditions? Where can you find them? How do you recognize a better deal? You’ll find answers to all these questions in this article.Why did I get stuck with this expensive car loan?It is said that it makes no sense to cry over one’s past mistakes but knowing why you end up overpaying will let you understand which loan will best suit your needs and it will also let you avoid making the same mistakes when refinancing. After all, you don’t want a finance company to take advantage of you once again.The two main reasons why people close on bad deals on car loans are: The pressure exercised by car dealers to agree on car loans offered by dealerships and bad credit situations that may force someone to agree on bad credit car loans which tend to have extremely high interest rates due to the higher risk involved for the lender in such financial transactions.What do I have to look for when refinancing?Before deciding what you need, you have to understand what is affecting you negatively on your current car loan. If your current car loan is too onerous, it may be due to a high interest rate or a short repayment program which implies higher loan installments. A combination of these two factors can aggravate the problem.If the APR you are currently being charged is too high, you may reduce your monthly payments just by refinancing your car loan with the same loan length as the previous loan as long as you get a lower rate. However, if that won’t make your installments more affordable, you may want to extend the length of the loan so your monthly payments will be reduced even more. Bear in mind though that longer repayment programs imply higher interest rates.If you just think you are paying too much interest, you can reduce the amount you spend on this category by refinancing your car loan with a lower rate, by shortening your repayment plan or by combining both alternatives. The amount of money that can be saved by doing so, usually averages a thousand dollars but can reach considerably higher amounts.Which lender will refinance my loan with better terms?Prior to answering this question, you need to check that your current car loan lender doesn’t charge a prepayment penalty fee. If he does, take that into account when considering refinancing. A Prepayment penalty fee may turn what would otherwise be a thousands dollars saving refinance into a non-advantageous financial operation.If there is no prepayment penalty fee or if it isn’t so onerous, you may want to search online for car loan lenders offering refinance car loans and request them to provide you with free loan quotes so you can compare APRs, loan schedules, monthly payments, and other loan terms to see which loan best suits your needs.