Do refinancing your car start your loan over? Part Of Refinancing a Car Loan In this series Refinancing a Car Loan Advertiser Disclosure Advertiser Disclosure We are an independent, advertising-supported comparison service. Our mission is to help you make better financial decisions by providing you with interactive financial calculators and tools, publishing original and objective content. This allows users to conduct research and compare data for free to help you make informed financial decisions. Bankrate has agreements with issuers such as, but not limited to, American Express, Bank of America, Capital One, Chase, Citi and Discover. How We Earn Profit The products that appear on this site come from companies that pay us. This compensation can affect the way and where products appear on this website, for example for instance, the order in which they may appear in the listing categories, except where prohibited by law for our mortgage or home equity products, as well as other home lending products. However, this compensation will affect the information we provide, or the reviews appear on this website. We do not cover the universe of companies or financial offerings that could be accessible to you. Westend61/Getty Images
3 min read published October 20, 2022
Written by Rebecca Betterton Written by Auto Loans Reporter Rebecca Betterton is the auto loans reporter for Bankrate. She specializes in helping readers with the ways and pitfalls of taking out loans to purchase an automobile. Edited by Rhys Subitch Edited by Auto loans editor Rhys has been writing and editing for Bankrate since the end of 2021. They are committed to helping readers gain confidence to control their finances through providing clear, well-researched facts that break down complicated topics into bite-sized pieces. The Bankrate promises
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We are compensated for the promotion of sponsored goods and, services, or by you clicking on certain links posted on our website. So, this compensation can impact how, where and when products appear in listing categories in the event that they are not permitted by law for our mortgage or home equity, and other home loan products. Other factors, such as our own proprietary website rules and whether a product is available within your region or within your self-selected credit score range may also influence how and where products appear on this website. Although we try to provide a wide range offers, Bankrate does not include information about every credit or financial item or product. swaps your current loan with a new one. You may get an interest rate that is lower and a shorter or longer term than the one you have currently. However, if you choose to extend the time to pay back a new loan could make you feel like you're starting from scratch. Many people refinance their loans to save money. But refinancing might not be a complete solution if you face more serious financial issues. What happens when refinancing starts your car loan If you decide that refinancing you loan is the best financial option for you, the new terms offered could make your monthly auto loan payment less expensive. However, you want to be mindful of the loan duration you select to avoid the fear of "restarting this loan" even if you've been making payments for a while. In the ideal scenario, you'll avoid adding too many additional payments to pay off the balance by choosing a term that is equal or less than the remaining period of your current loan. For instance, if you still have 36 months on your loan then you could refinance to a 36-month loan. This will save you from paying additional interest. Also, with an interest rate that is lower, your payments should also be less. However, refinancing might not be beneficial if you have less than 24 months remaining on your auto loan. It is common to pay the highest cost of interest during the first year of the loan which will reduce the cost savings you'd get should you decide to refinance near the close of the term of repayment. The impact of refinancing on your loan term The most common terms that motorists are faced with when financing a vehicle vary from 24 to 84 month. The shorter the term, the lower your monthly payment will be. However, with a larger loan it is possible that you will be in the position of paying hundreds of dollars more in interest than you would with a smaller loan. Even though you could get a different interest rate and term, the duration change will be the primary element in determining if you can effectively "reset" the terms of your loan. The term can be reduced or extended -- and the ideal choice will depend on your financial situation. To determine the best length of time, make use of an to find the length that best ensure that you are able to make monthly payments that you are able to afford. It's an excellent idea to refinance your vehicle loan There are a few principal scenarios in which it's an auto loan. You're struggling to afford the monthly installments. Refinancing or reworking your current loan's terms could allow you to pay off your vehicle or at a lower rate. However, you might be able to get a loan from the current lender with no refinancing. The reason you are taking out your current loan. More credit means better conditions. This is especially true if you originally financed through an auto dealership. The financing for your current loan through the dealership. If you did , you could be in a position to get better loan terms from an outside lender. Check to see how much you could potentially save by using a lower . If you decide to refinance you must read the purchase contract or reach out to you current lender to ensure they're not responsible for paying off the loan early. Otherwise, you could incur a sizable fee that outweighs the benefits of refinancing. Refinancing your car loan If you determine refinancing is the right option and you are ready to make the move. Review the current loan and arrange the paperwork to submit your next loan application. Examine your current loan. Look up the rate of interest, the payment amount, remaining months and information about any fees or penalties. Examine your credit score. Check to see if you have a credit report in shape to get a decent rate. Check your credit report for any errors while you're at it. Compare lenders. Don't go with the first lender that offers a decent rate. Check out several lenders such lenders, including their eligibility criteria as well as penalties, rates and terms you qualify for. Apply for refinancing. Once you decide to apply with a lender, apply on the internet as well as in person. The lender will inform you what you can qualify for and explain how the process will work. The main thing to remember is that you'll be starting all over again with a fresh auto loan when you refinance and potentially receive a lower monthly installment or . But before you make a decision, take into consideration the risks that come with refinancing. Look for other ways to save money if refinancing isn't the best move in your situation financially.
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Written by Auto Loans Reporter Rebecca Betterton is the auto loans reporter for Bankrate. She has a specialization in helping readers in navigating the ins and outs of securely borrowing money to buy cars. Written by Rhys Subitch Edited by Auto loans editor Rhys has been editing and writing for Bankrate since late 2021. They are dedicated to helping readers gain confidence to take control of their finances by providing clear, well-researched details that cut otherwise complicated subjects into bite-sized pieces.
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