For many people in the USA, a car is essential for daily life. Whether it is ferrying the kids to school or getting to work on time – it is an important part of the family. Many US citizens pay for their car via an auto loan, making monthly payments to repay the loan over a set period. If this applies to you then you might also be thinking about car loan refinance to bring down the overall cost.
This means you can refinance your current auto loan with a new deal from another lender. This can help you reduce the amount you pay back each month while also saving you money in the long run on the total amount you eventually repay. When you refinance your car loan you can normally extend or shorten the loan period as desired.
Interest rates are the key factor
But how does this sort of refinancing save you money? It all comes down to the interest rate on the new loan you take out. This is known as the Annual Percentage Rate or APR. This figure is the amount of interest you pay on any loan you take out calculated on an annual basis. It determines not only the monthly payment you will make but also how much you will pay back over the whole period.
On average the APR for a 60-month car refinance loan in the US is 4.21%. However, this can be affected by a number of factors when you take out a new loan deal. Credit score rating is a major influence, as is the age of the vehicle, your vehicle type, how long you take the new loan out for and which new lender you choose.
Bringing your APR down is key
When looking at interest rates on car loans you obviously want the lowest figure possible. By paying less annual interest on the amount you borrow, you will be able to slash your monthly car repayments.
If for example you currently pay 5% APR on your existing auto loan but can refinance with a new lender at an APR of only 3%, then you will certainly see a financial difference in what you are paying out each month and over the whole period. As well as the APR on your loan, make sure to double check for any additional fees that may apply as this will naturally have a financial impact.
Car loan refinancing is worth considering
If you ever find yourself wondering about the amount you currently pay each month on your auto loan, then refinancing with a new lender may be worth looking into. Understanding the interest rates and APR around auto loans is vital so you can get a better deal with the new lender. A great tip is to take your time to look at as many different auto loan providers as you can. When doing so watch out for additional charges that are hidden in the small print of any agreement.