Tuesday, June 5, 2012

Is Auto Loan Refinancing Worthwhile?

As the price of automobiles has increased in the last few decades, so has the length of loan terms. Along with this, though, there has also been a corresponding increase in the availability of auto refinance loans, a loan product that became available at about the same time that 72-month auto financing became available. Are they really worth getting into, though? In some cases, the answer might well be yes, but if your car is at or near the end of your loan term, and you're considering taking out a loan against the value of your vehicle, such as with a title pawn loan, you could easily find yourself in the unenviable situation of being totally upside-down on the loan, and possibly stuck with a vehicle nearing the end of its useful life.

Obviously, a title pawn loan should only be used as a last resort for an emergency financial situation. On the other hand, refinancing a long-term auto loan with a better interest rate loan might in fact be a good idea. After all, any chance you can get to save a few bucks these days has got to be a good thing.

Auto Loan Refinance

Finding the right loan for you, though, might be a bit tougher than you think. There are a host of companies out there that offer auto loan refinance, but the terms of the loans can be a bit difficult to navigate, even if they aren't entirely impossible. For one, if the value of your vehicle is less than the amount you owe on your existing loan, you can pretty much bet that the loan company isn't going to want to refinance it. After all, if you could refinance and get a check for a junker, then default on the loan, the finance company would never be able to recoup their investment, even by repossessing the vehicle. For obvious reasons, that would be a bad business.

Most credit card providers offer some sort of auto loan refinance, as do major banks. Local, smaller banks and some smaller credit unions aren't likely to offer them, though, since they do tend to be specialty loan products. Available in terms of 30, 48, and 60 months, a good place to start is by signing up to receive quotes on a website such as Bankrate.com. This is the easiest, quickest way to get an array of options from which to choose.

Interest rates are going to vary from company to company, obviously, but for the most part, bear in mind that the longer the term of the loan, the higher the interest rate that you'll end up paying. It may only be a few points, but over the course of the loan, it will add up. To give yourself the best chance of a good finance rate, make certain that your credit score is in top notch shape, and minimize your debt-to-income ratio by paying off debts such as credit cards and other unsecured loans. This preparation will give you the best chance of getting a refinance loan at the rates that the finance companies advertize.

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