When you first receive an auto loan, you may simply be overjoyed that you were even approved for the financing. Too often, however, Americans allow the delight of loan approval to cloud their judgment regarding interest rates. Unfortunately, many Americans are paying higher rates than their credit would permit.
Most individuals who shop for a car are unable to pay the total amount at the dealer. Instead, customers seek the aid of the dealer for help in obtaining a loan. If you have unsteady credit, you may experience some difficulty in getting approved by a bank for the loan. When a bank does choose to finance your car, it may or may not be at a competitive interest rate.
The interest rate, which is a percentage of the loan that you will have to pay, will be divided according to the loan term and added to your monthly bill. For example, suppose you receive a loan for $30,000 at a fixed interest rate of 10%. This means that after the loan period has expired, you will have paid $33,000. Loan periods can be last for up to 10 years. In most cases, a buyer who chooses to repay the loan at a lower interest will repay the loan in a short amount of time, perhaps 3 years. A buyer who prefers a longer loan period will be assessed a higher interest rate.
Unfortunately, those with a poor credit rating will be subject to higher interest rates. This rule applies even if the buyer chooses to repay the loan in a short amount of time. In fact, most borrowers with poor credit will not be approved for short term-low interest loans. Instead, he or she usually is required to settle for a medial loan term, and a high interest rate that is independent of the loan life is applied. A poor credit history will result in a large amount of money paid in interest.
Refinance: Car Loan Rates
If you were initially assessed a high interest rate on your auto loan, you may want to consider refinancing your car. When you refinance, you enlist a bank or loan institution to pay the balance of your auto loan for you. The new lending institution then bills you monthly for the loan. The difference is that the loan term and interest rate will be more reasonable and more on your own terms.
When you refinance, you are given the option to research which bank or loan company you would like to take on your loan. Instead of being at the leniency of a bank to approve your loan, you are now in more control, since you can compare and contrast the terms and car refinance interest rates available to you. If you have been managing your current auto payments wisely, and have paid the minimum monthly payment on time for several months, you will more likely be able to choose the loan terms you prefer. This is because your credit rating increases whenever you make your payments diligently. You will appear as less of a risk to lenders than when you initially applied for an auto loan.
Auto Refinance Rates
Car refinance rates are dependent on a wide range of variables. The auto refinance rate you are assessed will depend on what state you live in, your assets, your credit rating, and the value of your car. This is especially important, for if the value of your car is less than the amount you currently owe, you are unlikely to be approved for refinancing. Determine your cars worth and the amount you owe on the current loan before beginning the auto refinance process. Used car refinance rates steadily increase as time goes by, so try to repay as much of the loan as necessary. This way, you will own more of the car than the bank, and you will be more likely to be approved.