Smart savings: Refinance an auto loan

A big downside of purchasing a vehicle is actually paying for it each month. The worst part about that is paying the interest on the note, which can range from the low single digits to the mid-20s in terms of percentage.

If your loan turns out to have a high, high interest rate, then your best option might be to refinance. Even if you have an interest rate in the high single digits, it might be worth the effort to see if refinancing can lower your monthly payment and save you money.

Here are four reasons why refinancing your auto loan will benefit you in the future.

Shorten loan term

If you’re looking to pay your vehicle off quicker, see if you’re eligible to refi an existing 72-month loan into a 48-month loan. This helps you pay off the vehicle faster.

Lower monthly payments

If you need more time to pay the loan or your monthly payment is too high, a refi can increase the term of your loan. If you see that the 36-month loan term you took out originally was a mistake, you may want to check if you’re eligible to refi to a 60-month loan.

Shave off interest

Decreasing the term of the loan also shaves away at the overall interest you’ll pay. Check out the graphic below to see an example of the savings on a 48-month loan versus a 72-month term.

See if you can refinance your auto loan.

 

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