Bad Credit Refinancing

Refinancing a car loan is one of the easiest and least-known ways to substantially save a great deal of money on car payments. As interest rates drop, people scramble to refinance their homes, but few people's thoughts turn to refinancing their vehicles. In fact, to refinance is much easier to do than a home refinance, typically requiring about ten minutes to fill out an online application.

The process to refinance a vehicle works the same as home refinance, enabling the borrower to pay off the current amount with a different lender, offering a lower interest rate, which saves money. Finding a lender and a great rate for refinancing car loans is only a click away on the computer. Online lending services list the best rates available and can even match the consumer up with a lender based upon their needs and application information. Borrowers do not need an appraisal to refinance a vehicle, as many erroneously think, so the process is relatively quick and simple.

There are several situations in which the refinance process is in consumers' best interests. Those who recently purchased a car through a dealer and opted for using dealer financing since the process seemed simpler may suddenly find that the interest rate the dealer offered was substantially higher than the market rate. Dealers almost always charge higher rates on auto loans than banks or credit unions. Refinancing a car loan in this situation could save hundreds of dollars over time.

Changes in one's financial situation can also make the refinance process a necessity. Perhaps a consumer financed their vehicle with a short-term loan, accepting the higher payments with the hope of paying it off earlier. If that person's financial situation has changed and he or she does not have as much monthly income to devote to the vehicle payment, refinancing car loans can help convert the existing debt into a longer term debt, resulting in much lower monthly payments.

To refinance is also a useful tool for those who want to get out of the leasing trap. Once a consumer falls into this trap, they find out that the low monthly payments are trade-offs for the huge lump sum owed at the end of the lease. Most people cringe at the payoff amount and instead opt to take out another lease. The result is the borrower never becomes car payment free. Refinancing a car loan is a great way to fund a lease buy-out, which is where the leasee uses a new borrowed amount to purchase their contract from the dealer.

When shopping around for refinancing options, consult banks and credit unions. The Internet is a great resource for comparing numerous refinancing car loans rates offered by different banks. Make sure that no points are charged on any loans considered. Many people never take advantage of the tremendous savings from the refinance process. Perhaps they are unaware of the process or have been scared away by the mountains of paperwork a home refinance demands. "I will freely sacrifice unto thee: I will praise thy name, O LORD; for it is good" (Psalm 54:6). Be an empowered consumer and evaluate whether refinancing is the right thing to do.

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