Refinance a loan question?

[blueweltall]

What's the benefit of a loan refinance? Why do people do it? I'm asking this question because I have a loan out for my car. When I got the loan the loan officer said that I'm more than welcome to come back in a year to get my loan refinance . Well it has been a year and I'm thinking about doing it but I really don't know nothing about refinanceing. Much help will be greatful. Thanks.

 

[ryanbph]

usually a refinance rate will be lower then the rate you have currently on your loan...but since rates have gone up some, it may or may not be worth it...What I did, in order to lower my debt to income so I could get approved on my mortgage, is I refinanced my car loan, added 1 year to the loan, and lowered the % rate by 2.5%...So my parents were lower from the % rate, and because of extending the loan by 1 year

 

[beguile]

The only benefit in refinancing is not having to pay as agreed on your first contract. If you can't afford to pay as promised in your original contract, you should refinance. Otherwise, I wouldn't refinance my loan. Refinancing your loan would cause you to pay a higher interest rate and make you more in debt. Hope it helps.

 

[miniarnold]

Another reason to do it would be if you believe that your credit score has improved, although I would think that refinancing something as short term as a car loan will not net you much benefit unless they gouged you when you signed the initial contract.

 

[blueweltall]

Cool thanks for the help. I have three years left and I'm planing to pay off the entire loan in six months. So will this be a good idea to get it refinance? My rate is pretty high since I'm starting to build up my credit.

 

[mcwilliams132]

Refinancing a car is MUCH different than refinancing a home...

Homes apreciate in value...cars depreciate...so the ability to refinane a car will be hard to do....you typically have to have other collateral to refinance a vehicle (such as a home - or other asset of value)...Remember it has to be in the bank's interest to refinance.

 

[Skylander7]

I wouldn't refinance the vehicle unless you really need to lower your payments and depreciation would be minimal. If you end up trying to trade it in or sell it, and your principal is higher than the value, you'll end up going backwards on the next loan or something. Then again, I work in commercial lending, and I see people often paying just the interest off, renewing, and repeating the entire process. If you are paying off in six months, I'd say pay it off instead of doing a refi.

People typically refinance a vehicle in order to get a better interest rate or to lower the payments, yet end up extending the term in the process.

 

[dtcarson]

if you're able to pay it off in six months as of now, I wouldn't bother trying refinance--by paying it off i n6 months instead of 3 years, you're already doing to save a lot of money in interest payments [assuming there's no prepayment penalty].
A lower payment isn't a benefit, if you have to pay for 2 more years...
You see all the '450 a month!' ads, but no one ever asks "how many months?'

 

[Admiral Ackbar]

If you can get a lower interest rate then refinancing is good. I had my Stafford loans from school with a variable rate locked in at 4.25%. They were 4.5 and variable. Also, after three years of on time payments it'll be reduced to 3.25%.

I wouldn't refinance a car loan unless you had a HUGE loan. Usually people refinance on the big stuff. stuff in the tens of thousands. But if you can get a better deal go for it.