Refinancing Auto Loans Is About More Than Getting A Lower Interest Rate

The conventional wisdom about refinancing loans is that it either leads to the rich getting richer or to the poor getting into an even more desperate financial situation.  If your financial situation has improved since you took out the loan, then your new, shiny credit score qualifies you for a loan with a lower interest rate than the previous one.  As an added bonus, since you have been paying down the principal on your old one, the new loan will have a lower principal amount.  Therefore, you will get out of debt faster and less expensively.  Meanwhile, if your financial situation has gotten worse, you can get a cash-out refinance, turning what little equity you had in your car (or whatever collateral is securing the loan) into more debt, perhaps even with a higher interest rate for your original loan.  Refinancing car loans is fairly common, and there are many other ways and reasons that people do it.  If you are struggling with debt, refinancing your auto loan can be an effective temporary solution.  For a more comprehensive solution, though, contact a Philadelphia debt collection abuse lawyer.

Should You Refinance for a Shorter Term or a Longer One?

The interest rate is only one factor that borrowers consider when choosing a loan; the term of the loan is also an important factor.  Car loans with a repayment term of more than five years are increasingly common; if your goal is simply to lower your monthly payment to get through a financial hardship that you assume will be temporary, then refinancing for a loan with a repayment term as long as seven years could be a good option.  If refinancing is part of a snowball method strategy to pay off your debts, though, then refinancing for a shorter term could help you save money and pay off your debts, even if the interest rate on your new loan is similar to the interest rate on your old loan.

Car Loan Refinancing as a Debt Consolidation Strategy

Don’t be deterred by the personal finance experts who judge you if you are refinancing your car loan because you are struggling to pay your current one.  Car loan refinancing can act as debt consolidation.  For example, if you have multiple vehicles that you have financed, it might be more manageable to refinance their loans into a single loan.  This strategy works best if you can find a loan with a long repayment term and a low interest rate.  Alternatively, you can take out an unsecured debt consolidation loan and use it to pay down one or more of your car loans.

Contact Louis S. Schwartz About Car Loan Debt

A Philadelphia consumer law attorney can help you if you love cars but the debt attached to them is much less endearing; a car loan refinance or a debt consolidation loan could be the solution.  Contact Louis S. Schwartz at CONSUMERLAWPA.com to set up a free, confidential consultation.

Source:

caranddriver.com/auto-loans/a43027563/worth-it-to-refinance-car-loan/