If you are considering refinancing your car, you should only do so for the following three reasons:
1) You can get a better interest rate. If you can get a rate at least 1 percent better (and preferably 3 or 4 percent better), go ahead and refinance your auto loan. You won't get much benefit from anything smaller than 1 percent. Mentally it may seem like 5.99% is better than 6.25%, but the reality is that they're so close it's not even worth your time.
2) Not being able to make payments on your car loan is another reason you should refinance. If you can't afford the payments and may default on your loan, definitely refinance. If there is a possibility that your car will be repossessed in the next couple months, refinance as soon as you can if this will prevent repossession.
3) Not being able to afford payments on your home loan is a definite reason why you should refinance your auto loan. This will only work if refinancing your auto loan will lower your car payments. Then you can use the money you save on your car loan to pay your mortgage.
However, if you're thinking about getting equity out of your car so you can get money to pay other bills, you should know that this is NOT a good reason to refinance. Cars do not have equity since they are depreciating assets, and each day they are worth less than the day before.
Banks sometimes offer "car equity loans," but don't get sucked it. Even if your car is worth more than you owe right now, that won't last long. Borrowing against any equity you have today is always a mistake - all you're doing is stealing from your own future by adding more payments to your current loan. Would you rather make an extra two years of payments on your car so that you can have an extra $100 today? Probably not.
If you do choose to refinance for extra cash now, you will regret doing so in two or three years when you are making those extra couple years of payments. The only reason you should refinance is if you are at risk of defaulting on a major asset.
If you decide that you should refinance, follow this advice:
Don't pay any fees unless they're minor (such as the $20 your bank may charge for a new title or lien). Walk away from "refinancing fees" and "loan origination fees," and other charges along that line. The bank should be happy for your business and shouldn't charge you for it.
Never add more time to your car loan unless you are desperate to have your payments lowered. You shouldn't refinance using another five-year loan if you originally financed your car using a five-year loan two or three years ago. In a case like this, the only thing refinancing has done is increased the amount of time you will have to pay on your car. If possible, refinance using a loan that will end when your original loan would have ended.
Always check with your credit union. Not only do credit unions want to help you, they usually have excellent rates. They will work with you more than a regular bank will, especially if you are in a situation where you may default on your loan.
Article Source: http://www.orbitaloc.com/
Author Jason Lancaster, a car business veteran, created AccurateAutoAdvice.com. You'll find accurate advice on how to refinance your car and auto loan refinance.
Please Rate The Above Article From The Root Category Category
Article Title: Car Loans: When to Refinance
Not yet Rated
Syndicate Root Category Related Articles Via RSS!
Subject to Orbitaloc.com's Publisher Terms of Service, you may reprint this
article on your own website, blog, and ezine. (English only) You may also syndicate
the article via Really Simple Syndication (RSS). It is free of charge.
Free Articles on Root Category and Other FREE Content Article Topics
The preceeding is an informative article from the Root Category category.
