Can you refinance a fixed rate car loan to a variable loan?

Variable rate car loan repayments change depending on numerous outside factors. When rates fall, your repayments will fall too. But it’s a double-edged sword. When interest rates go up, your repayment rises with them. If you don’t want to be at the mercy of rate changes, moving from a variable loan to a fixed rate car loan may be a good idea. With a car loan refinance, you can switch from your current loan to a finance solution that fits your current situation better. 

What does it mean to ‘refinance’ a car loan? 

When you refinance a car loan, you’re essentially leaving your current loan and lender and opening a new one with a new lender. Typically your new lender will use the funds from your new loan to pay out and close your old loan with your old lender.

Refinancing allows you to take advantage of better rates and new loan features, or simply find a loan that’s more suited to your current financial situation. 

Is refinancing from a variable rate to a fixed rate loan worth it? 

There is no straight answer as it really depends on your situation. What’s right for someone else may not be for you. You must consider factors such as your finances, current interest rates, and how far along you are on your existing car loan before refinancing your car loan.

Keep these car loan refinance pros and cons in mind so you can make an informed decision before applying for refinance: 

Pros of refinancing a car loan 

• Save money. If you find a fixed rate car loan with low interest rates and fees, you could save more money in the long run compared to continuing with a variable rate loan. Plus, you won’t have to monitor interest rates closely and breathe easy knowing rate increases won’t affect your loan. 
• Repayments are more manageable. Figuring out a budget plan is easier since fixed rate loans have the same repayment amount throughout the loan term. You can create a budget weeks or even months in advance because the repayments on your loan never change. 
• Adapt your repayments or add loan features. Refinancing your car loan gives you the opportunity to change your repayment scheme and acquire loan features you don’t have right now. If your current lender doesn’t allow for repayment frequency changes or doesn’t have certain features available, refinancing your car loan could be a good idea. 

Cons of refinancing a car loan 

• Additional fees. When you refinance your car loan, you may have to pay break fees and early exit fees on your old loan, as well as application fees and ongoing fees on your new one. These additional expenses can pile up quickly leaving you with less savings. 
• Less flexibility with a fixed rate loan. Fixed rate loans usually don't have features like redraw facilities or free early payment which could help you pay off your car loan quickly. When looking for a refinance loan, check the terms and conditions carefully to ensure it has everything you want. 

Is it difficult to refinance a car loan? 

Refinancing a car loan is a bit more complicated than applying for a new loan. Because you’re dealing with two separate lenders, you have to provide more documents and requirements than usual. 

Once you’ve found a car loan refinance that meets your needs, you need to let your current lender know so they can inform you of the next steps. They’ll also inform you about the fees you have to pay and the documents you must sign. 

When applying for refinance, every lender has a different process with some being more difficult than others. At loans.com.au, applying for a car loan refinance is straightforward and can be done entirely online! Simply fill out your loan application or talk to our friendly lending specialists who can complete your form for you. 

What should I look for in a fixed rate car loan refinance? 

As you shop around for the ideal car loan refinance, you’ll find a variety of loans to choose from. It may get overwhelming but as long as you know what you want, finding the right one can be quick and easy. Here are a few things you should look for in a car loan refinance: 

• Low rates – A fixed rate car loan with low interest rates can help you save more on interest over the life of the loan.  
• Good features – Look for loans with features that can make managing your loan easier or help increase potential savings. 
• Minimal fees – Check out the comparison rates to get a better idea of the loan’s true cost with interest and fees included. 
• Convenient management – Find a loan that will make it easy for you to make repayments and manage your loan. 

To learn more about car loan refinance, get in touch with us today by calling 13 10 90 or schedule an appointment. You can also check out our range of car loan refinance options!

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