Car refinance refers to the transfer of car’s official ownership from one creditor to another. Many car owners find ways to trim down the cost of car ownership by refinancing them. It helps in reducing your monthly payments and lower interest rates. Refinancing a car loan is simple and quicker than mortgage refinancing. Refinancing might be appealing for several buyers, but it makes sense only under one or more of these below mentioned circumstances.
Interest rates decreased: If interest rate has decreased by a percent or two, since you bought the vehicle, then refinancing help you to save money in the entire loan term. The new and pre-owned car loan interest rates in India are between 10.65-12.75% and 11.45-18.25%, respectively.
Improved credit score: Car loan refinancing lowers your interest rate. If you have improved your credit score or have no credit history, then you might get a refinance at lower interest rate.
Didn’t get the best rate: The dealers-sourced auto loan interest rates in India, usually, are higher than the bank approved loans. If you owe less than the vehicle’s worth, you can get more money by applying for refinancing. For example, you purchased a car three years back that currently is worth Rs. 5, 0000 and you owe Rs. 3, 0000. You can save some money by refinancing you vehicle for Rs. 4, 0000.
Lower your payments by extending the loan: Refinancing helps you extend the loan term. For example, if you are in debt for two more years on your existing car loan, this could be refinanced for the next four years. The additional two years term will lower your monthly payments, depending on the offered interest rate. This will reduce your financial burden and will give you some time for managing financial crisis, though, you have to pay for two years more. Take a note that vehicle loan interest rates in India vary quite often.
Change Lenders: Changing a lender might benefit you, but that usually depends on your relationship with your lender. If your lender is tough to find or not providing you payment information, then this might work in your favour. Search well, and refinance at the best rate.
Personal financial setback: Refinancing could be an option, if you have some personal financial problems or setback and want lower monthly payments and a long loan term.
Car lease is expiring: If your car lease terms are fulfilled, then you have an alternative to purchase a new one.
