What should you consider before refinancing your car loan?
Car loan refinance involves exiting your current car loan to enter a new one, switching lenders in the process. Because there’s a lot of work that goes into refinancing a car loan, you need to be certain that you’re making the right call.
Here are a few questions you should ask yourself before refinancing your car loan:
What do you want out of your car loan?
Figure out what you want to accomplish with your car loan refinance. Refinancing your car loan can be a time-consuming and costly endeavour. You don’t want to do it on a whim. Common reasons why borrowers refinance their car loans include wanting to save money, taking advantage of record-low interest rates, or getting features unavailable with their current car finance.
Ask yourself if your current car loan is giving you what you need. If not, are there car loan refinance options out there that better match your financial goals? You’ll have an easier time finding the best car loan refinance for you when you know what to look for.
What do you want to change about your current car loan?
Are you unhappy with the loan features? Is the repayment frequency making it difficult to manage payments? Do you want to extend or shorten the loan term? Knowing exactly what’s lacking in your current loan will help you understand what type of car loan refinance you need. There’s nothing worse than going through the arduous refinance process only to end up being unsatisfied with your new loan.
Also, it’s best to understand how adding loan features like a balloon payment, changing repayment frequencies, or modifying the loan term could affect the overall cost of the loan. Sometimes, it can save you a lot, while other times, it could increase the total interest paid over the life of the loan. It all depends on what kind of changes you’re looking for.
To better understand how changing certain aspects of your car loan could affect cost, you could use an online car loan calculator. By adjusting certain fields on the online calculator, you can see how it increases or decreases the repayments and total cost of the loan.
What’s your current financial situation?
Your financial situation can have a huge impact on the car loan refinance rates and your chances of approval. Refinancing is essentially taking out a new car loan. This means car loan refinance lenders will look at your finances, credit rating, and credit history.
If you’ve recently improved your credit rating or have become more financially stable since taking out your current car loan, refinancing may be a good idea. With a higher credit score and better financial situation, car refinance lenders may give you better rates and terms.
However, the opposite is also true. For instance, if your credit score has dipped a few points, refinance lenders may offer a higher rate or less flexible terms than what you currently have.
Can you handle the cost of refinancing?
Car loan refinance can be costly with exit fees, early termination fees, closing fees, application fees, and other related costs. If your goal is to lower the overall cost of your loan, you need to make sure that your future savings are worth more than the expense of refinancing your car loan.
In addition to loan fees, you should also pay attention to current interest rates and comparison rates. Rates may have changed significantly depending on when you’ve taken out your current car loan. See what the going rates are on the market and help you figure out if refinancing your car loan is still worth it.
Do you want to change lenders?
You’ll never really know how good your lender is until you’ve taken out a loan with them. The good news is a car loan refinance allows you to change lenders. This allows you to find one whose processes are more compatible with your needs or you feel provides more convenient services.
If you are happy with your current lender but still want to refinance, you could ask your lender what your options are. Some lenders may allow changes to your current loan to accommodate your needs better.
How to refinance a car loan with loans.com.au
If you’re ready to refinance your car loan, don’t hesitate to get in touch with us! Check out our car loan refinance options to see which one suits you best. Or you can apply online and we’ll get back to you.
If you have any more questions about getting a car loan refinance, call our friendly lending specialists at 13 10 90. They’d be more than happy to discuss our car loan refinance solutions.
Find out in under 2 minutes if you qualify for one of our low rate car loans.
About the article
As Australia's leading online lender, loans.com.au has been helping people into their dream homes and cars for more than 10 years. Our content is written and reviewed by experienced financial experts. The information we provide is general in nature and does not take into account your personal objectives or needs. If you'd like to chat to one of our lending specialists about a home or car loan, contact us on Live Chat or by calling 13 10 90.
