With interest rates still historically low, refinancing a mortgage can be a smart move: it can save you hundreds a month, or thousands over the life of the loan.
But does that same logic apply to your car loan? It certainly could. In fact refinancing your car is cheaper and involves less hassle than refinancing your house. But there are a few things you need to watch for.
Step one: do a web search for current rates. Make sure you look at refinancing rates, though, not new car loan rates. You'll probably find your best rates at a credit union or small, local bank. But is your credit good? Keep in mind the rates you're quoted will be for the best borrowers.
Step two: Compare rates you find with the rate you're paying now. There are online calculators that will quickly show you the savings.
But before you greenlight that new loan, be sure and talk to your existing lender. They may refinance you cheaper because they want to keep your business. Also, while you've got them on the phone, ask about prepayment penalties and see what your loan payoff is.
Savings still there? You're ready to roll. But before you get going, some additional considerations: First, resist the temptation to extend the life of the loan for lower payments. In fact, if you can, shorten it. Also, understand that most interest is paid in the first half of a car loan. So the younger the loan, the more you'll save.
Bottom line? Refinancing a car loan could be a good idea, especially if you don't end up paying more interest over the long run. Certainly, it's something worth checking out.