Contrary to what you might think, your bad credit does not disqualify you from auto refinancing. In fact, auto loans may be the easiest to secure even after bankruptcy. Read on to know more about auto refinancing, how it can help you, and whether you should apply for it.
Auto refinancing works much like mortgage refinancing – ideally, a new lender who offers a lower annual percentage rate (APR) gives you money to pay off your current car loan. Your loan is therefore transferred to and restructured by the new lender. Your monthly payment should become significantly smaller, and in some cases even the interest drops. Some people are able to pay off the loan faster because of these incentives.
Auto refinancing became popular in 2001, when many consumers learned to take advantage of the flexibility that the scheme offers. Auto refinancing companies have since been competing with each other, slashing interest rates (as low as 6 percent) and offering better terms of payment. Auto refinancing is good not only for people with bad credit – the majority of people who avail of it have good credit scores, but would like to bend their car payment method to their advantage.
Getting back to financial stability is ultimately dependent on how you manage your cash flow, and while securing an auto refinance loan will not solve all your problems, it will certainly ease your burden. Auto refinancing lowers the monthly payments you have to make for your car, so you can use the extra money to pay high-interest loans like credit card loans, or to start building your savings account again. And because you get to keep your car, you can continue using it productively. Whether it’s to go to and from work or take your kids to soccer practice, you can afford the convenience of mobility even when you have bad credit.
The decision to apply for auto refinancing is up to you. If you decide to restructure your auto loan, though, do not hurry. Take time to shop around and see which lender can provide you the best rates. If you can, you should arrange a meeting with financial counselors (most lenders give this service for free) and compare notes.
By: Ken Marlborough