Lower Your Car Payments by Refinancing

Car and truck refinancing is basically the cancellation of your original loan and substituting it with another. Your main goal in car and truck refinancing is to lower the monthly payments without extending the time of the loan itself. Your ability to get car and truck refinancing will depend a few factors, but your credit rating is usually the main one.

For those who are interested in taking advantage of getting car and truck refinancing, there are a few things to keep in mind when making your decision.

Depreciation: Unlike real estate which generally tends to stay or increase in value over time, your vehicle will be worth less as time passes. This is due to two factors, the lessening demand for the vehicle model and the wear and tear on the vehicle itself. Depreciation is an important consideration since the car and truck refinancing will be set at the new value of the vehicle, not the value of when it was purchased.

For example, if you paid $10,000 for your new vehicle and you made 12 months worth of payments for $200 each, you could do car and truck refinancing if the vehicle is worth more that $7,600. But if your vehicle is only worth $7,000, you would still owe more than what the vehicle is worth and not be able to refinance unless you make a new down payment of more that $600.

Trucks generally depreciate at a slower rate than cars, so you will want to keep this in mind when considering the timing of your refinancing options. For cars, you generally want to refinance within a short period of time, perhaps a year or two at most depending on the depreciation rate of the vehicle. By checking the blue book value of car models the same as your over the past two to three years, you will get a general idea of the depreciation rate.

Simple Interest Rate: Auto loans can be a complicated contract that is not as straightforward as it might appear. Many vehicle loans carry hidden formulas that punish you for paying off your vehicle early or even up the interest rate as you are close to paying off your loan. When you decide to car and truck refinance you will want your new loan to carry a simple interest rate alone with no other special attachments.

A simple interest rate is easy to calculate and you can pay off the loan early if you desire without fear of penalty. You will definitely want to negotiate a new car and truck refinancing that only carries a simple interest rate because it can benefit you in the long run with lower payments and the ability to pay off the loan early.

Shop Around: There is more than one lender for vehicles. You can look for discounted rates at your local small bank or credit union to get a better deal than the one you currently have. Be aware that some of these lenders may want you to open an account or have some other pre-condition, so do your research before committing yourself to a new loan.

Getting a good deal on car and truck refinancing can benefit you in the long run by lowering your monthly payments and even reducing the time of your auto loan which will allow you to use the extra money as you see fit.

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