I’m not one for gambling. I don’t play the lottery, I’ve never been to a casino, and I definitely don’t enjoy taking risks. So when my friend told me about how he refinanced his car loan and saved himself a ton of money, I was skeptical, to say the least. But after doing some research and crunching the numbers, I decided to give it a shot. And you know what? It paid off—literally. I ended up saving over one thousand dollars by refinancing my car loan.
Here’s how it all went down
I originally took out my car loan when I purchased my vehicle four years ago. At the time, I was young and naive and didn’t really know much about interest rates or any of that stuff. As a result, I ended up with an interest rate that was sky-high—much higher than it should have been. When my friend told me about refinancing, I realized that it might be a good way to lower my interest rate and save myself some money in the process.
What does it mean to refinance?
Before talking to my friend, I wasn’t even really sure what it meant to refinance my car. After some research, this is what I found:
When you refinance a vehicle, you’re essentially taking out a new loan to pay off your existing car loan. You might do this to get a lower interest rate, to change the length of your loan, or for other reasons.
Of course, there are some things to keep in mind before you refinance your vehicle.
- For one thing, you’ll need to have good credit in order to qualify for a low interest rate.
- You’ll also need to make sure that the terms of your new loan are better than the terms of your old loan; otherwise, there’s really no point in refinancing.
- Remember that refinancing comes with some fees and closing costs, so be sure to factor those into your decision.
How to refinance your car loan
I did a quick Google search on “how to refinance your car loan” and found a few different articles that were helpful. After reading through them, I had a pretty good grasp on the process and what I needed to do.
The first step was to find out what my current interest rate was so that I could compare it to potential new rates. Turns out, my interest rate was 18%! Yikes.
I then used an online calculator to see how much money I could potentially save by refinancing my car loan. The results said that I could save around $200 per year—which wasn’t too shabby. But I wanted to see if I could do better than that, so I decided to shop around for new rates.
I ended up finding a great interest rate of 4.5%—a full 13.5% lower than my current rate! By switching to this new rate, I would save over $1,000 in interest payments over the life of my loan. So yeah, you could say refinancing was a pretty smart move on my part.
The process of refinancing my car loan was pretty painless, too. I simply applied for a new loan with the company I found online, and within a few weeks, the whole thing was finalized. And just like that, I was saving money on my car loan each month.
Tips for finding the best rates when refinancing your car loan
Now that you know refinancing your car loan can be a great way to save money, how do you find the best rates? Here are a few tips:
- Know your credit score. The better your credit score, the lower the interest rate you’ll qualify for. So it’s important to know what your score is before you start shopping around.
- Shop around. Don’t just go with the first loan offer you get. Talk to multiple lenders and compare rates.
- Consider shorter loan terms. Shorter loan terms often mean lower interest rates. So if you can swing it, consider refinancing for a shorter term than you currently have.
- Get pre-approved. Pre-approval means you’ll know exactly how much you can borrow and at what interest rate before you start shopping for a new car. This can give you negotiating power when it comes time to buy a new vehicle.
- Ask about cash back offers or other incentives. Some lenders offer cash back or other incentives when you refinance with them. It never hurts to ask if there are any special deals available.
By following these tips, you can be sure you’re getting the best rate possible.
If you’re thinking about refinancing your car loan but aren’t sure if it’s worth it, let me put your mind at ease—it definitely is! Not only will you potentially save yourself a ton of money in interest payments, but you’ll also have peace of mind knowing that you’re getting a better deal on your loan. And who doesn’t want that?
