Sarah T.
Refinancing a car is well-known as a strategy to help you save money, either for the long haul or by freeing up some monthly cash. Auto refinancing is when you take out a new loan to pay off an existing loan. In most cases, this means lower interest rates or a longer loan duration.
But, there are some limitations as to the types of cars that you can refinance. In this article, we’ll talk about some of the common reasons why people choose to refinance their automobiles. And, we’ll give you the down-low on the types of cars you can refinance and those you can’t.
Can I Refinance an Auto Loan on a Used Car?
Let’s get right to it: Yes, you can refinance an auto loan on a used car. However, there are certain eligibility criteria you need to meet.
First, the age and condition of the car are important. Most lenders prefer cars that are less than ten years old and have fewer than 100,000 miles. Next, the outstanding balance on your current loan matters, too. Lenders usually look for loans with a remaining balance that's not too high compared to the car's value.
Your credit score and financial history also play a big role. A higher credit score and a solid financial record can help you secure better refinancing terms. Lenders often view used car refinancing as riskier compared to new car loans, so terms might not be as favorable.
To find the best refinancing options for used cars, shop around and compare offers from different lenders. Look for those that specialize in used car refinancing and have positive reviews from customers. For example, RateWorks provides auto refinancing for used cars. Be sure to check out what we have to offer, today.
Why Should You Refinance Your Auto Loan?
Managing a budget these days is hard. With costs rising all around us, it seems we need to be able to afford all the same things but they come at us with higher prices. Gas costs more. Groceries cost more. And the cost of living and inflation keeps going up everywhere we look.
Thankfully, auto refinancing is a great way to help you free up some monthly cash to help make all those increasing costs easier to manage. But that’s not the only thing. So, let’s explain why you may want to refinance a used car loan.
Lower Interest Rates
Refinancing can help you secure a lower interest rate on your auto loan. This means you’ll shell out less money in interest over the loan term, saving you a significant amount. For example, if your current loan has a 7% interest rate and you refinance to a 4% rate, the savings can be substantial over a few years.
Reduced Monthly Payments
Refinancing can lower your monthly payments by extending the loan term. This can make your budget easier to manage each month. However, while your payments are lower, you might end up paying more in total interest over time. For instance, extending a 3-year loan to a 5-year loan reduces payments but increases the total interest paid.
Better Loan Terms
Refinancing can also offer better loan terms. You might remove prepayment penalties or switch from a variable to a fixed interest rate. These changes can make your loan more predictable and easier to manage. When refinancing, ask the lender about these options to make sure you get the best terms for your situation.
Improving Cash Flow
Lower monthly payments can free up cash for other expenses or savings. This improved cash flow can help you manage your personal finances better. For example, you can use the extra money to pay off other debts, save for emergencies, or invest. Make sure to use the extra cash wisely to improve your financial health, such as paying down other debts.
Looking for an Easy and Affordable Way to Refinance Your Auto Loan on Your Used Car?
Refinancing a car loan is easy and the entire process doesn’t take long at all—in most cases, just one to two weeks. See how RateWorks can save you money on your used car loan. Get a free quote today.
