Does Auto Refinancing help me reduce my payment in total?

Question

or reduce just monthly payments which will result my terms be extended? I don't know how refinancing works. Currently my payment is $457/ month and 48 months left. I'm interested in refinancing my car, but don't want to do so if it just reduce my monthly payments and term is extended. What if I have my car refinanced, what will happen? Is monthly payment gonna be lowered with the same term(in my case 48months)? or monthly payment stays the same and term's gonna be shortened? I'm sorry if I'm not making sense... somebody help me~

Answer 1

Best Answer - Chosen by Voters

There are many reasons to refinance, but the two primary reasons are to lower you payment or reduce your interest rate.

I’ve spoken with people that had to refinance a loan because they experienced and economic down turn. With the down turn they could no longer afford their current debt load and got behind on some of their bills, as a result their credit score was lower. They refinanced their loan at a higher rate and a longer term, but they met their primary objective, lowering their payment so they could meet their other obligations.

On the other end of the scale are folks bouncing back from an economic down turn. Their current loan is at a higher rate because they had a lower credit score at some point in the past when they financed the car. Often these people refinance at a lower rate and a much shorter term so they could pay off their loan much quicker.

If you do not qualify for a better interest rate, or you do not NEED to lower your payment you should not refinance. If qualify for the same rate that you have now and want to pay off your loan early increase the payment you send in each month. Most lenders now-a-days use simple interest contracts so any additional amount you send in will be applied to the principle.

Answer 2

You could get a lower interest rate, which could result in lower payments.... you can also shorten or lengthen the term, or leave it the same, depending on the age of your car.

Whats your current interest rate, and balance on the loan?

Answer 3

Interest rates on car loans tend to be tied to the age of the vehicle. If your current loan was for a new car and the vehicle is now 2 years old, the best interest rate will be higher. That will increase the total amount you pay.

The only way to refinance your car to get a lower payment and NOT extend the term, would be to get a much lower interest rate and that might not be possible.