Pros and Cons of Refinancing a Car

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The Pros of Refinancing a Car Loan
Lower Interest Rate and/or Monthly Payments
Different Loan Terms
You Can Afford to Pay More
You Could Get Better Terms
You Can’t Keep Up with the Bills
Frees Up Money to Pay Down Debt
A Source of Extra Cash
The Cons of Refinancing a Car Loan
Finding a Lender Can Be Tough
Your vehicle is more than 10 years old You owe less than $7,500 on your current loan You owe more than $100,000 on your current loan Your car has more than 100,000 miles on it You drive for Lyft or Uber as your primary source of income or otherwise use your car for commercial purposes
Prepayment Penalties and Fees
Temporary Credit Score Dip
4 Tips When You’re Refinancing an Auto Loan
1. Don’t be in a hurry as you shop around for a loan
2. Consider applying for prequalification
3. Remember the loan-related details
4. Plan your timing
Will Refinancing Impact My Credit Score?
When Is It Worth Refinancing a Car?
A refi could make sense if you lost your job, or a spouse is working less and you need to cut your monthly budget. A refi might be a good idea if you can qualify for a better interest rate or better terms than you got on your old loan. It could be that when you got your car loan your credit score was pretty shabby, so you didn’t get a great rate. However now that your score has improved, you’re likely eligible for a much better rate. Lowering your payment by a percentage point or two can make a difference and save you money. Refinancing might also align with your goals. For example, if you’re on a mission to pay down debt, applying the monthly savings from refinancing can help you get there.
Can You Refinance With Bad Credit?
Alternatives to Refinancing Your Auto Loan
The Takeaway
Frequently Asked Questions
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About the Author
Sheryl Nance-Nash is a freelance writer specializing in personal finance, business, and travel. Her work has appeared in Money Magazine, Newsday, The New York Times, Business Insider, BBC.com, AARP the Magazine, ABCNews.com, Forbes.com, among others.
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