If you have recently financed a vehicle, you may be wondering how your emails are filled with car refinancing offers already. It doesn't take long for different institutions to get a hold of your contact details, especially if you have just received an auto loan. Here's what to do when you find yourself in a situation like this.
Take a Look at the Offers
Even if you’re happy with your current lender, it doesn’t hurt to check what someone else may be offering you. You may feel like you already have a great payment plan from your current lender, but even if a new lender offers a slightly better plan, do not reject it outright.
Weigh the New Offers Against Your Existing One
When it comes to auto refinancing, it’s better to consider the following factors:
- Your current balance
- Current interest rate
- Remaining loan term
- Total interest once the term finishes
- Estimated total cost and monthly payment
Once you have the numbers in place, compare them with what the new lender is offering. For instance, if your current interest rate is 7% and the new lender is offering a slightly lower rate of let’s say 6.5%, it’s still a worthy deal to consider, and here’s why:
It will help you save money
Even with a slight decrease in rate, you can end up saving a significant amount of money. For example, a reduction from 7 to 6.5% may not seem significant, but when you calculate the total amount you’ll be paying for the whole term, you’ll end up saving hundreds of dollars.
You can get a lower rate for the same duration
The world of car refinancing is filled with limitless possibilities. For instance, if your current interest rate is 7% with a total loan duration of 12 months, a new lender may give you 6.5% for the same duration i.e. 12 months. This means you'll be paying less money per month for the same duration.
In conclusion, while auto refinancing is one of the best ways to reduce your interest rate and get better terms, do not rush into it. It's highly possible for the information to be incomplete, especially in emails, and lenders will always put their best foot forward to gain your attention. However, rushing into it just because you saw one better option than your current deal may get you in serious trouble. A new lender may be offering you a lower interest rate but don’t forget to check what duration they’re offering. If it’s longer than your existing one, then a lower interest rate is no longer a credible reason to consider switching lenders.