Preliminary overview
In life, there is one thing we can always rely on, and that is change. It emerges in all aspects of our life and can involve positive or negative outcomes.
Due to the constant ebbs and flows we experience, it is crucial to have the opportunity to leverage change to enhance our financial situation based on our individual circumstances. And this is where refinancing could be your best friend.
If your circumstances have changed since you first took out your car loan, or you’ve started to think you could potentially secure a loan more beneficial to you, it’s a good idea to explore refinancing options.
What is refinancing and how does it work?
In short, a refinance occurs when the terms of an existing loan are revised. This includes the re-evaluation of a borrower’s credit and repayment status and typically happens when interest rates fall.
When refinancing, an approved borrower may choose to take out a new loan with a new lender to replace their current car loan, or simply make changes to the current car loan with the same lender. If a borrower chooses to refinance using a new lender, the money that is borrowed off this lender will pay off the current car loan. Following this, the borrower will owe money to the new lender and make regular repayments according to the terms of the new car loan agreement.
What are the benefits of refinancing my car loan?
There are a number of reasons why refinancing your car loan could be beneficial to you.
If you took out your loan with a fixed interest rate, but interest rates have since fallen - refinancing could lower your monthly repayments. This is because you may be able to secure a lower interest rate. Similarly, by refinancing you can extend your loan term which can assist you with your personal cash flow. However it’s important to note that extending your loan term could increase the rate of interest.
Another reason refinancing could be beneficial for you is because it may provide an opportunity to take on a loan that doesn’t impose unjustified fees, like monthly fees. These fees often significantly accumulate over a loan term, so if you can reduce or eliminate them, it could help you in the long run.
Finally, a refinance could also help you access more flexible loan features. Due to the competitive nature of the car financing market, many car loans offer increasingly flexible terms and conditions. So, by refinancing, you could gain the ability to make additional repayments on your car loan. Some other refinancing benefits you could experience are the ability to add or remove a joint borrower, or deal with a new lender if your current one has not met your expectations.
When should I refinance my car loan?
When and why you should refinance your car loan is up to you. However, if your circumstances have changed, it may be a good time to refinance. Examples of circumstance changes that could warrant refinancing are if your credit score has improved, if you have changed careers, or if you want to add or remove a co-borrower.
Another time to consider refinancing could be when you want to reduce your payments or when you are looking for a better deal. An example of this is if interest rates have dropped since you took out your current loan. Even a drop of 2% to 3% points could save you significantly over the life of your loan. However, before refinancing, it’s a good idea to speak to your current lender.
Will refinancing impact my credit score?
The short answer is yes. Refinancing could lower your credit score, but it will be short and minor. In the long run, refinancing could actually improve your credit score. By refinancing, you could significantly reduce your debt and the amount you pay each month, which are two things that appeal to lenders. So although your score will initially dip a few points, it could potentially be back to normal, or better, within a few months.
How to access your credit score
Individuals are entitled to receive a number of free copies of their credit report every 3 months. There are companies that advertise a fee to provide a copy of a credit report. Before jumping in for those services, it may be advisable to consider your free options first. The Federal Government MoneySmart website provides information on where to access a free copy of your credit report. This information includes the contact details for several credit reporting agencies.
Rounding off
Change is inevitable, which is why many lenders offer you the opportunity to leverage change to enhance your financial situation based on your individual circumstances.
In short, refinancing your car loan could help you save money in the long run, especially if your financial situation has changed or interest rates have dropped since you took out your current loan. There are a variety of benefits that could be achieved by refinancing your car including greater flexibility, reduced monthly repayments, securing a lower interest rate, ditching unjustified fees, and finding a lender that better meets your expectations. However, when exploring the idea of refinancing your car loan, it’s important to talk to your lender or broker about your options and whether or not it is a good idea for you.
Accelerate your decision to refinance your car loan with JADE Finance
If you’re part of the way through a motor vehicle funding term and it’s no longer working for you, speak with our expert brokers about changing to a new funding arrangement that does work for your current situation. For whatever reason you want to refinance, our loan brokers will explore the options and work through the potential benefits with you.
At Jade Finance, we pride ourselves on delivering better loan interest rates and a fast-approval application process to quickly get you the information you need. To find out what could be possible for your situation, call us on 1300 000 008 or Request a Quote now.
