When To Refinance Your Car Loan
Are you finding it difficult to finance your existing car loan? Don’t worry, and we are here to help you out to solve your problem. A lot of people are unaware of the term “REFINANCE.”
Refinancing is the process of financing and existing loan by taking up another loan. This is mainly done when you are not able to pay the existing mortgage, and the interest amount keeps on increasing. In this scenario, a person can refinance his existing loan by taking up another loan of a lower rate of interest. Refinancing is mainly done to take advantage of the lower interest rate.
Why Refinance Car Loan? There are various reasons to refinance your car loan. Below mentioned other few reasons that will help you understand the reason for refinancing.
- TO REDUCE THE INTEREST RATE: The main reason to refinance a loan is to take advantage of the reduced interest rate. If you get to know about a loan package which offers a lower rate of interest you can invest this in your existing car loan. By doing this, you can avoid paying a higher rate of interest and save your money. This is one of the greatest advantages of refinancing.
- MODIFY THE LOAN PERIOD: If you want to increase or reduce the period of your loan, you can go for refinancing. By increasing the period of your loan, you will extend the time of your payment. When you decrease the period of your loan, the amount paid on interest ultimately reduces. By doing this, your EMIs will automatically reduce. However, it would help if you kept in mind that the payment you’ll be making from now onwards will be much high.
- ADD OR REMOVE A PARTNER: By refinancing your existing loan, you can add or remove a partner. Adding a new partner is done to increase the surety, and the loan amount gets split into two. When you wish to remove your partner from your loan, you can do the same. By doing this, you become the single owner of the car.
- OPT FOR OTHER CAR LOAN: A lot of time you take impulsive decisions and end up taking a non-satisfactory loan. Do so because at that moment you couldn’t find any better option. But during the tenure of your loan when you find another car loan with better services you can opt to refinance your existing car loan so that you can jump to the new one.
Things To Keep In Mind Before Refinancing An Automobile Loan
- PENALTY CHARGES: Refinancing has a lot of advantages, but you should always keep the other side factors in mind before taking action. When you decide to make the prepayment of your loan you incur additional charges. These additional charges are nothing but, the penalty interest rate you have to pay to the bank. The interest rate may vary between 1 to 3% on the total amount.
- RELIABILITY: Going for refinancing is easy, but before pitching into one, make sure the refinancing agency is a reliable one. Most often, people decide to refinance by seeing a lower rate of interest. But once you make the decision, the refinancing agency vanishes away. Due to this, you land yourself in a soup. Thus before getting into any refinancing process, make sure you do in-depth research of the other financial institution.
- EXTRA CHARGES: The process of refinancing I will make you incur additional charges. When you take the loan from another bank, you will uncover the processing charges and various other fees, which will result as an expense for you. Thus make sure you estimate your extra costs very precisely.
Wrong Time For Refinancing
Refinancing is a good idea when you get better opportunities. But this doesn’t prove to be right all the time. There is always a specific time when you need to make such decisions. And there are certain times when you should avoid getting into refinancing. Below mentioned at the few ones.
- WHEN A HUGE AMOUNT OF LOAN IS ALREADY PAID: The idea of refinancing will not make any sense when you are already paid a massive amount of loan. When you opt for refinancing the loan at this stage, you will end up paying more on the additional charges rather than saving on the small interest. Thus never ever take the decision of refinancing when the loan is at the verge of getting over.
- WHEN THE ADDITIONAL CHARGES OF THE NEW LOAN EXCEEDS: A lot of time people see the advantage of refinancing and don’t make an overall estimation. When they finally take the step of refinancing, they realize that they are paying additional money from the pocket rather than saving on the interest amount. The interest amount of the initial loan will be lesser compared to the extra charges taken by the new agency. Therefore before pitching into refinancing, make sure you calculate the additional money you will be spending from your pocket for refinancing.
Financial Institutions That Provide The Service Of Refinancing
Refinancing is a service which is offered by almost every financial institution. Though there are restrictions imposed on the service, the service has its place everywhere. The eligibility and criteria of refinancing differ from institution to institution. It also depends on the amount of loan an individual has taken, rate of interest and the tenure of the loan. In most cases refinancing request is turned down by the institution due to the restrictions imposed.
But if you are lucky enough to meet the criteria, then you can easily save your money by refinancing your loan. Capitall Singapore gives the service of refinancing and a complete guide on it. If you really want to refinance your loan, you must make an in-depth study of various institutions and their services. This will involve a lot of time. But if you don’t mind spending time in research, you will come out with the best services from the best institution.