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 goal is to help you make smarter financial decisions by offering interactive tools and financial calculators, publishing original and objective content, by enabling you to conduct your own research and compare data at no cost to help you make financial decisions with confidence. Bankrate has agreements with issuers such as, but not limited to American Express, Bank of America, Capital One, Chase, Citi and Discover. How We Make Money The offers that appear on this website are provided by companies that compensate us. This compensation could affect how and when products are featured on this website, for example for instance, the sequence in which they be listed within the categories of listing in the event that they are not permitted by law. This applies to our mortgage home equity, mortgage and other home lending products. However, this compensation will not influence the information we provide, or the reviews that appear on this website. We do not cover the entire universe of businesses or financial offerings that could be available to you. Westend61/Getty Images
3 min read Published 20th October, 2022
Writer: Rebecca Betterton Written by Auto Loans Reporter Rebecca Betterton is the auto loans reporter for Bankrate. She specializes in helping readers in navigating the ways and pitfalls of borrowing money to buy an automobile. Edited by Rhys Subitch Edited by Auto loans editor Rhys has been writing and editing for Bankrate since late 2021. They are dedicated to helping readers gain the confidence to take control of their finances with concise, well-researched and reliable information that breaks down complicated topics into bite-sized pieces. The Bankrate guarantee
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We are compensated for the placement of sponsored products and, services, or through you clicking specific links that are posted on our site. So, this compensation can affect the way, location and in what order products appear within listing categories and categories, unless it is prohibited by law. This is the case for our mortgage and home equity products, as well as other products for home loans. Other elements, like our own website rules and whether a product is offered in the area you reside in or is within your own personal credit score could also affect the manner in which products are featured on this website. While we strive to provide the most diverse selection of products, Bankrate does not include the details of each credit or financial products or services. You can swap your current loan with a new one. You may get an interest rate that is lower and a shorter or longer duration than the one you have currently. If you opt for a longer repayment period on the new loan may make you feel like you’re starting from scratch. A majority of people refinance in order in order to cut costs. But refinancing might not be the ideal solution for you if you’re facing an even bigger financial issue. What happens when refinancing starts your car loan If you decide that you want to refinance the loan is the best solution for you financially and the terms that are offered can make your monthly loan payments more affordable. But, you must be aware of the loan term you choose to avoid the feeling of “restarting your loan” even if you’ve been making payments for a long time. It is best to make sure you don’t add too many payments to settle the balance by choosing a loan term that is equal or less than the remaining term on your current loan. If, for instance, you have a remaining term of 36 months on your loan and you want to refinance it to a 36-month loan. This will stop the need to pay additional interest. Also, with the lower rate of interest, your payments should also be lower. However, refinancing isn’t advantageous if you have less than 24 month remaining in your car loan. It is common to pay the highest amount of interest in the initial years of the loan which will reduce the cost savings you’d get when you refinance at the close of the term of repayment. What effect does refinancing have on the duration of your loan duration The most frequent terms drivers are met with when financing a car. The terms range from 24 to 84 months. The , the lower your monthly installment will be. If you take out a longer loan it is possible that you will be forced to pay thousands of dollars higher interest than you would have with a shorter loan. Although you can get a different interest rate also, the term change will be the primary element in determining if you actually “reset” your loan. The term can be reduced or extended — and the ideal choice will depend on your financial situation. To best determine your ideal duration, make use of an opportunity to determine the one that will best ensure that you are able to make monthly payments you can be able to afford. If you’re looking for a reason to refinance your car loan There are several situations in which it’s an auto loan. You’re having trouble making your monthly payments. Refinancing and reworking your current loan’s terms can give you more time to repay your vehicle or at a lower rate. You may also be able to get a loan from to your existing lender and not refinancing. The reason you are using this loan. Better credit will mean better terms. This is especially true if you initially financed your loan through the car dealer. You financed the current loan with the dealership. If you did , you could be in a position to get more favorable loan conditions with an external lender. Find out how much you could potentially save through a reduced . If you choose to refinance then read the purchase agreement or contact the current lender to verify that they aren’t allow you to pay off the loan in a hurry. If you do not, you’ll be charged a sizable fee that outweighs the advantages of refinancing. How to refinance your car loan If you think refinancing is the best option for you, to take. Reflect on your current loan and arrange the paperwork to submit your next loan application. Review your existing loan. Look up the interest rate, payoff amount, months remaining as well as information on any penalties or fees. Check your credit score. Make sure you have a credit report in enough condition to qualify for a good rate. Examine your credit report for errors while you’re at it. Compare lenders. Don’t choose the first lender with a reasonable rate. Review several of them, including their eligibility requirements, penalties and what are the rates, terms and fees you qualify for. Apply for refinancing. If you’ve decided to go with a lender you can apply on the internet and in person. Once you have submitted your application, the lender will let you know what you can qualify for and also how the process will work. The bottom line You’ll start from scratch with a new auto loan by refinancing and potentially get a lower monthly payment or . But before applying, consider the potential risks involved with refinancing. Find other options to save money, if refinancing isn’t a good choice in your situation financially.
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This article is written by Auto Loans Reporter Rebecca Betterton is the auto loans reporter for Bankrate. She is a specialist in helping readers to navigate the ins and outs of securely borrowing money to purchase a car. Written by Rhys Subitch Edited by Auto loans editor Rhys has been editing and writing for Bankrate since the end of 2021. They are passionate about helping readers gain the confidence to control their finances through providing precise, well-researched and informative facts that break down complex topics into manageable bites.
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