Car refinance can save you a lot of money in the long run, but exactly how much can you save? With the cost of everything going up and up these days, every penny counts. And we know that hypothetical savings don’t mean that much: our customers want to know just how much money they can save with vehicle refinance.
That’s why we have a free, easy to use loan refinance calculator on the Auto Approve homepage to help you start to figure out how much you could be saving when you refinance. All you need to do is plug in your loan information, and our calculator will take care of the rest!
Here’s how to use our car loan refinance calculator, and how you can decide if you should refinance your car loan.
How to Use Our Car Loan Refinance Calculator
To determine exactly how much money you can save with car refinance, you can use our car loan refinance calculator available on our home page at autoapprove.com. Using our car loan refinance calculator is super simple. You will just need some basic information:
- Your remaining loan amount
- Time left on the loan
- Your current APR
- Your new APR
By simply plugging in this information, you can see exactly how much money you might be able to save with a car refinance.
For example, let’s say you have a loan with a balance of $35,000. You still have four years, or 48 months, left to pay it off. Your current APR is 10%, but you have been approved for a new rate of 2.25%. By simply plugging all of this in our loan calculator, you will find that a refinance will save you $5,977.74.
Here’s what it looks like:
Simple as that! While the calculator doesn't factor in your credit score and can't guarantee you'll get the refinance you're looking for, it's certainly a good start! And if you want to get a more complete and accurate picture of what you might be able to save, you can always get a free quote – it's fast, easy, and there's no credit check or obligation to get a quote.
How Does Car Loan Refinance Work?
So what exactly is auto refinancing and how can it save you so much money?
Auto refinancing is when you pay off your existing car loan with a new loan, a loan that ideally has a lower APR and better terms overall. When you lower your APR, you can save a lot of money in interest every month. And if you refinance to a reduced repayment period, you can save money by reducing the amount of time that you will be paying interest.
You can refinance your car with a number of lenders. From credit unions to traditional banks to online lenders, there is an unending list of places to apply. But using a company that specializes in car refinance can make your life much easier.
At Auto Approve, car refinance is what we do. We have relationships with lenders across the country so we can secure you the best APR and best terms for your refinance. All you need to do is fill out some basic information and we will handle the rest! We even handle the paperwork so you don’t have to. Our refinance experts can help guide you through the process and ensure that you are getting the best deal possible (and therefore saving the most money!)
What are the Benefits of Car Loan Refinance?
If you’re wondering “should I refinance my car loan?”, you should consider the benefits of refinancing. If any of the following apply to you, it might be worth considering a car loan refinance.
You Can Save Money
The main reason people refinance their car loans is to save money. And with how expensive everything is right now, saving money is the name of the game. By refinancing your car loan to a lower rate, you can drastically reduce the amount that you are paying in interest. You can also save money in the long run by refinancing your car loan and decreasing the repayment period. For example if you reduce your repayment period from 48 months to 36 months, you will cut out an entire year of paying interest. And that can add up to big savings.
You Can Reduce Your Monthly Payments
If you reduce your interest rate, you will automatically reduce your monthly payments. But you can also reduce your monthly payments by lengthening your repayment period. If you change your repayment period from 36 to 48 months, you will stretch out your repayment by twelve months and therefore reduce your monthly payments. You will end up paying more money in interest in the long run, but depending on your financial situation, lower monthly payments might be more beneficial than long term savings.
You Can Add or Remove a Cosigner
If you originally had a cosigner on your car loan but no longer wish to have them on the account, you will need to refinance your car loan to remove them. On the other hand, if you would like to add on a cosigner, you will also need to refinance your loan. Since loan terms and APRs are highly dependent on the applicant’s credit score and financial history, removing or adding a person will affect the probability of a loan being paid back in full and on time (in the eyes of the bank at least). Refinancing your loan is the best way to adjust who is listed on your loan.
When Is a Good Time to Refinance?
The best time to refinance depends in part on your personal finances and in part on the market at large. If any of the following apply to you, it might be time to consider refinancing your car loan.
When Your Credit Score Has Increased
The APR that you are offered will depend a lot on your credit score. Your credit score is an indication to lenders of how likely you are to pay back your loan in full and on time. The higher the credit score, the more likely lenders will consider you to pay back your loan. Credit scores are broken down into the following brackets:
- 800 to 850: Excellent credit
- 740 to 799: Very good credit
- 670 to 739: Good credit
- 580 to 669: Fair credit
- 300 to 579: Poor credit
The best APRs are reserved for those with excellent and very good credit scores. Taking the time to improve your credit score can pay off in the long run (If you’re looking to improve your credit score, check out our blog post on 8 simple tips to help your credit score).
When You Need Some Extra Money Every Month
If you find yourself struggling to pay your bills every month, refinancing your car may help ease your monthly burden a bit. By securing a lower car loan APR, you will save money every month. But even if you do not qualify for a lower car loan APR, refinancing can still help lower your monthly payments.
The car loan that you currently have cannot be easily adjusted. You cannot decide to change the repayment period to adjust your payment amounts. But when you refinance your car loan, you can change the repayment period. So instead of paying off your car in 36 months, you can decide to pay your car off in 48 months. This means that you can repay the same amount over a longer period of time, therefore reducing the amount you are paying every month.
While you will end up paying more money in the long run because you are paying interest for a longer period of time, it may still be worth it to consider. Refinancing to a longer repayment period can provide a lot of relief to an overworked budget.
When the Market Rates are Low
The car loan APR that you are offered will depend in part on your credit score and financial history. But the market rates are another major factor in the car loan APR you will be offered. Today’s rates are still much lower than they were in previous years, making it the perfect time to consider vehicle refinance.
When Is It Not a Good Time to Refinance?
There are times when it will not make sense to refinance your car loan. If any of the following apply to you, it might be a good idea to hold off on refinancing.
Your credit score has decreased
If your score has decreased since your original loan, you may not qualify for a better car loan APR. Credit scores can decrease for a number of reasons, such as:
- Late or missed payments.
- High credit balances.
- One of your credit limits decreased.
- A lot of new credit inquiries.
- Your credit utilization score has dropped.
You need a high credit score for another reason
Refinancing will cause your credit score to take a slight dip in the short term. If you need your credit to be in good standing for another reason, say a mortgage application, it is best to wait to apply for refinancing.
The fees outweigh the savings
Many car loan contracts have prepayment penalties. Read your contract closely to see if you will incur any penalties, and call your lender directly if you are still unsure. Be sure to do the math and determine if any penalties outweigh any potential refinancing savings.
You owe more on your car than it is worth
When you owe more on your car than it is worth, it is referred to as being “upside down” or “underwater” in your loan. If this is the case, you may not qualify for refinancing.
And that’s how to use our loan refinance calculator to decide if vehicle refinance is right for you!
If you’ve been thinking about refinancing your car loan, use our loan calculator to see exactly how much money you could be saving – or get your free, no commitment, hassle-free quote to get started right now.