Ever heard of the term refinancing? If you purchased your home on a mortgage or a loan then chances are you probably could have. Refinancing home loans means that you try to finance your current loan with another loan that has a lower interest rate than your current loan.
Simply put, refinancing is being able to pay off your existing loan with another loan. The truth here is that refinancing is really not that simple but you do get the main idea of the process. The most important thing to remember is that refinancing will only work for you if you get a loan that has a lower interest rate than the existing one otherwise it completely defeats the purpose.
You see the main goal of refinancing is to allow the borrower to save some money that would have been spent on the loan with high interests.
Quite a few people have made it a habit to refinance their home yet save thousands of dollars in the process.
In spite of this big increase in savings, not everyone is willing to do the same for vehicle loans.
Refinancing vehicle loans is similar to refinancing home loans, which means that you pay your current loan with money obtained from another loan that has lower interest rates.
Trying to find a great way to pay off your vehicle loan and at the same time save some money? Refinancing can be the answer to your problem. Having a loan that has a lower interest rate means that you only pay a small amount every month plus you get to pay off the balance on your current loan in a shorter amount of time.
Sadly, not everyone completely understands the real value of time and money. Little do they know that they are actually spending more whenever they take a longer time to pay off their loan. Overall, more money gets spent on the interest instead of the principal amount.
To give you a clearer idea of how refinancing a vehicle loan works — for example, you borrowed $16,400 with 21% APR to purchase a new Honda Civic, that is payable in 60 months. The monthly payments would reach around $444, and eventually you’ll end up paying about $10,300 on interests alone by the time you finish paying off the entire loan. If you choose to take a refinancing vehicle loan, the amount you save on a new loan with 6% APR could reach $7,650.
Now isn’t it about time you think about refinancing your vehicle loan?
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Filed under: Car Loans