Oftentimes when people go to buy a new car, they’re not always trying to scrape for pennies on the dollar. When there’s a car you want and you’ve got enough money, or if you are desperate for a vehicle as a means of transportation, you buy a car. Whatever the interest rate is at the time is not something you can help, which means you might be paying much more for the car then you had saved for. You can, however, make sure your credit stays in good shape in order to knock off a few interest rate percentages, or qualify for an auto loan from the best financial institutions. But what if those monthly payments are still too high? How are we supposed to have any money left over each month to invest and grow if we are constantly weighed down by monthly bills? Time is a fascinating thing in that it can actually be beneficial for us sometimes to put off our debts so that we can take advantage of the present to produce value and compound it through reinvestment. This is precisely what refinancing is all about.
Amortization: A Ticking Time Bomb In Reverse
Time is also of the essence for anyone who has even gotten a loan straight from the dealership when they’ve gone to get a car. If you don’t refinance right away, you will end up paying much more in interest rather than loan principle for the first several months. Ouch! If you did not know it already, this little fine print is what’s known as amortization, or in the context of monthlies, your amortization schedule. Car dealerships are in it to make theirs, so of course they want the interest payment first: If you were to default on your new set of wheels halfway through the loan, then they still wouldn’t lose out on making a decent profit. So therefore although you are billed the same each month, the first payment is weighted heaviest towards interest, the second a bit less, and so on. If you were to stick it out for the duration of the loan without refinancing, you would still have paid the original % interest on the entire principle amount.
It Happens In Real-Life
My girlfriend recently financed her car. She bought a brand-new VW Golf in 2019 at 5.74% interest and had it refinanced by the bank it three years later at 2.74% interest. It was this week, actually. Please, don’t wait to jump on the bandwagon; visit refinansiere.net to find even better refinance packages than hers. Now she is saving herself 10$ per monthly payment for the next 36 months, and was even given a 1% cash bonus, which for her borrowed principle is $65. That may only amount to about $425 in savings over the course of three years, but it’s still nothing to laugh at. On the other hand due to amortization, when she refinanced, the loan was already almost halfway over; she had already made the bulkiest of interest payments. Had this been done a year or two ago, she could have saved herself over $1,000 in interest and lowered her monthlies even further.
Refinance With Low Interest No Matter Your Credit
Now the above-mentioned person also has very good credit. There was no good reason for her to wait this long to refinance her car; especially since interest rates were even lower last year at this time. But if your credit has been hurt and you have an auto loan you want to refinance, you may still be able to apply to refinance with security. Secured loans are backed by some sort of collateral, which can sometimes be even a physical asset. In this case, the financial institution with whom you choose to refinance your automobile will take out a mortgage on the asset so that they can force a sale if in chance you were to default on the refinanced loan. These mortgage-backed loans always have better interest rates, and provide the perfect solutions for people with less-than-fair credit. However, not all secured loans are any good. While putting up physical assets as collateral can give you access to quick cash from a loan-shark, you may still be charged high interest and even lose your valuables if you miss a single payment.
Unsecured Loans
For those of us like my partner who have good to excellent credit, most of us that bought a car probably have an unsecured loan, which means we are eligible for unsecured refinancing Even though the rates on secured loans are decent there is more freedom with going unsecured. The process is much simpler and quicker than refinancing a mortgage on a car, and depending on the size of the original loan, you’re more or less free to choose where you want to move it. However, it is advisable to insure the car for at least as much as you would be required to with a secured loan. Unsecured loans also have higher rates than secured and so a shorter repayment period or paying a loan back quicker will keep you from high interest costs.
Refinance Your Car By Using Your Mortgage
To keep your monthly car payments down to make room for immediate savings, you want the lowest possible interest rates possible and the longest time to pay if off. That means applying for secured refinancing and extending the due date out, or choosing unsecured refinancing once you finally have excellent credit to score the lowest possible interest. But if your credit is less than excellent and you do not qualify for the rate you want, and are still unwilling to sign up for a secured refinancing- there is one other options available. If you have a mortgage, you can call your bank and ask to extend it in order to bake in the remaining price of the car. Of course, the existing amount owed on the house and car combined must not exceed 85% of the home’s resale value. But then the interest rate on the car would be the same as your predefined mortgage rate, and you would have as much time to pay it off as you would your house. Keep in mind that any refinancing you do in attempt to lower your monthlies- even if your new interest rate is considerably lower- can end up with you paying more for the car in the long run. Therefore, the home-mortgage car-loan-consolidation trick works the best when you have only a few years left on the home loan.
