Now is the time to consider refinancing your car loan if you have one open. Doing so might be a helpful move and the smartest step you’ve taken in a long time. These are 10 reasons to refinance your car loan.
1. Lower Payments
One of the best reasons to apply to refinance your car is that you can get lower payments. Many people start off with unfavourable finance agreements just to get their favourite car off the lot. However, such people can apply for car finance Melbourne deals and refinance their original agreements provided they’ve paid off enough of the loan and have had a good repayment history – requirements will vary from lender to lender. You may want to consider refinancing if that’s your situation.
2. Lower Interest Rate
Another good reason to refinance your car is to lower the interest rate on it. Your credit score has most likely improved since you’ve made numerous timely payments on your original loan. Now you may have access to lower interest rates because of your improved score. A lower interest rate means you’ll keep more money in your pocket each month. That should be reason enough to go ahead and apply for refinancing.
3. Credit Score Boost
A refinance deal can boost your credit score eventually. It may not happen right away because of how the scoring system works. You might see a slight dip in the beginning because of the new account. However, you will see a significant difference as you pay your monthly fee in good faith, and the lender reports your payments to the bureaus. The boost you see in the end may be well worth it.
4. More Trust With Other Lenders
To succeed as a debtor, you must always make moves that will advance your position in the credit world. Your primary goal should be to obtain positive marks on your profile. Your second goal should be to gain trust from future prospective lenders. A refinance deal can gain you more trust with other lenders and reflect positively on your borrower status over time, providing you continue to make payments on time. A world of new credit might be available to you once you establish that trust. You may want to consider refinancing your car for that reason.
5. Shorter Loan Term
Refinancing your car loan might be just what you need to reduce the length of the loan. You’ll have the opportunity to talk to the prospective refinancing company about the various loan terms you can accept. Switching to a loan that has a shorter length might be wise for you if your car is aging and losing value quickly. For example, you can switch to a 36-month loan if your original loan was 60 months. That way, you can finish paying it off before your car loses the majority of its value and significantly reduce the amount of interest you pay.
6. More Money Available for Other Bills
You can use a refinance deal to improve the handling of your other bills as well. For example, you can use the money you save on your car loan each month to put toward other bills within your household. For example, you may want to use some of that money to pay down your electric bill or car insurance. Perhaps, you want to use it to pay for better car insurance. A good refinance deal can help you do that.
7. Different Loan Types
Another benefit of doing a refinance is that you can request a different loan type this time. For example, you can receive a fixed-rate loan instead of a variable rate loan if that’s the type you had before. Variable loans tend to fluctuate each month, which may cause you to have a feeling of uncertainty regarding your bills. A fixed-rate loan might be better for you if you’re a person who likes to plan your financial strategies and budgeting movements ahead of time. Thus, the idea of changing your loan type may entice you.
8. Debt Consolidation
In some cases, you can get extra money with your refinance loan that will help you consolidate your debt. Debt consolidation is always a good thing because it makes life more organised and helps boost your credit score. The greatest benefit of debt consolidation is that you will only have to pay one lender every month instead of having to keep track of many monthly payments. A debt consolidation refinance deal can be great for relieving you of stress and strain in that regard.
9. Higher Self-Confidence
Debtors often struggle with feelings of newness and immaturity when they first enter the world of credit. This is especially true when they’re dealing with their first loan or credit card. A refinance deal might be the perfect confidence booster if you feel this way. It will give you the opportunity to broaden your horizons and work with another lender. It may also give you the motivation you need to work on your financial profile in other areas. You’ll think of new strategic ways to boost your profile and attract future lenders once you kick-start your financial stability.
10. Remove Co-Borrower
You might want to refinance your car just to remove a co-borrower. Perhaps, you needed a co-borrower in the beginning because your credit score wasn’t high enough to qualify without one. You may not need that other person listed on your loan now that you’ve made several payments on your original loan. Your credit score has likely moved from mediocre status to good or excellent status, which means prospective lenders will have much more faith in you. This might be the perfect time to apply for a refinancing deal for yourself.
Consider Refinancing Today
Now you know of some of the top reasons people refinance their vehicles. One of them is likely to appeal to you. You can start shopping for amazing car refinance loans to improve your financial profile right away.
Author Bio: Ray is a sought-after thought leader and an expert in financial and money management. He has been published and featured in over 50 leading sites and aims to contribute articles to help novice financial planners. One of his goals is to impart his knowledge in finance to educate and help ordinary people create and achieve their financial goals.
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