A car loan refinance has always been an effective way to stretch your dollars. And with economists fretting over a possible economic downturn, an auto loan refinance may be the perfect hedge against the double dip. Car loan refinances can help you ride out extended periods of tightened belts and with auto loan interest rates still attractive, now may be a good time to think about turning part of your car loan into cash.
An auto loan refinance (or car loan refinance) can put more cash in your hand each month in a few different ways:
- A dealer car loan will rarely save you money when compared to a competitive, online car loan refinance offer. If you made the mistake of financing an auto loan through the dealer, the chances of getting a better deal with an auto loan refinance are very high.
- Lower Federal interest rates than when you got your original auto loan is another low-hanging fruit when it comes to saving with a car loan refinance. If you got a car loan before the first recession, an auto loan refinance now could save you thousands of dollars.
- An improved credit score also qualifies you for lower auto loan rates. If you’ve recently rectified some negative items on your credit report, a car loan refinance may be worth your while.
- Extending your car loan term can put more cash in your pocket each month even if you can’t get a better interest rate with an auto loan refinance. For example, getting a car loan refinance for a 4-year $15,000 auto loan with 5.0% APR and extending it to a 6-year car loan will save you about $1,200 a year in monthly auto loan payments. An auto loan refinance that extends it further will reduce your monthly car loan payments even more.
In most cases, an auto loan refinance will help you cut costs in the short term and over the entire length of your car loan. But if you can’t get a better auto loan interest rate for whatever reason, an auto loan refinance may appear to cost you more in the long run. When facing a recession, however, it’s best to consider how to strike the best balance between taking on more car loan debt and meeting your monthly financial obligations. Getting a car loan refinance and paying more on your auto loan down the road is better than falling short on your other bills today. A car loan refinance frees up your assets so they can go towards student loans, credit cards, mortgages and other expenses that are extremely costly if allowed to become delinquent. Without the cash from an auto loan refinance, you may be forced to declare bankruptcy, rack up high interest credit card debt or take other actions that damage your credit rating. These actions have much deeper impacts on your long term finances than deferring a few car loan payments until the economy improves.
Take some time to run through the scenarios and see how an auto loan refinance can better prepare you for the tough times ahead.