Refinance car loan
Have you bought a car on credit in the last three years and are still paying off the loan? If you have / are it may be time to look around the loan market to see if you can save some money through a refinance car loan.
What is a refinance car loan?
A refinance car loan is a loan taken out with another loan provider where the car loan debt is legally 'transferred' from your existing provider to the new provider. This is a process known as refinancing and enables the borrower to take advantage of better loan deals from other car loan providers. The borrower can benefit from lower interest rates, payment holidays or the ability to spread the cost of the loan out further so reducing monthly loan repayments.
Depending upon the terms & conditions of your existing car loan, a refinance car loan may incur costs associated with the transfer. This is most likely if your original car loan was arranged through a car dealer, and may involve penalty charges for early repayment of the car loan. Before opting to take a refinance car loan you should therefore check your existing car loan policy to see if any charges will be levied in the event of early repayment.
How much can I save by opting to refinance my car loan?
If you arranged a car loan directly with a car dealer then it is possible that you could save hundreds if not thousands of pounds in the overall cost of your car loan when you opt to refinance. Recent research published by Alliance & Leicester has found that the average APR on finance deals arranged through showrooms is a whopping 12.4%. Compared to an unsecured personal loan of 6.0% that could be used to refinance a car purchase, borrowers could save around £1500 on a £8000 loan with repayment terms of 5 years.
Naturally, some car loan companies are offering car loan deals at a much higher APR than the 12.4% average. Just by searching the Internet it is easy to find car finance deals with a typical APR set at 15% or more, while some car credit companies are charging 19.9% APR. If you were to refinance a 19.9% APR car loan of £10,000 over 5 years by taking out a personal loan at 6.0% APR over the same repayment period, then you'd be able to save a massive £71.05 per month! Over the life of the car loan this refinance deal would save you £4263.28.
Given that there are some incredible savings to be made by simply moving your car loan debt to a different loans provider, isn't it about time you thought about a refinance deal for your car loan?