The Pros and Cons of Refinancing Your Auto Loan

While car loan refinancing for bad credit situations could be one of the most apt ways to deal with the rising burden of existing high interest auto loan debt, your decision to go ahead with such type of a proposal needs to be a carefully considered one. This is because car refinancing can result in advantages as well as disadvantages. To that effect, it could be better if you knew these before you proceed to apply for a bad credit auto refinance loan. Only experts can tell you more on the subject.

Auto Refinancing Pros

• Can help in lowering monthly payments
  By qualifying for a low rate bad credit car refinancing loan, you could be able to lower your monthly car instalments significantly and save money every month. Currently, interest rates offered on refinance auto loans for bad credit are at record lows so you can qualify for the lowest rate of interest.
• You can also get term of the loan reduced
  If there has been a huge drop in interest rates ever since you financed your new car then you may even consider reducing the duration of your loan to get rid of your costly auto loan by applying for a bad credit car refinance with a much shorter loan term.
• Use proceeds of loan for some other purposes
  Auto refinancing enables cash out for several other purposes. For example, if you are facing financial troubles after you have purchased a new car, you can apply for car refinancing for cashing out money to make up for shortage of money. But such kind of a proposition is not advisable.
• Build your credit score in a sustained manner
  Once you repay the current high interest loan with an altogether new loan at lower interest rate, it will reflect positively on your credit rating. Besides, if you pay the new monthly car instalments regularly they will also be reported to the major credit bureaus and this will improve creditworthiness.

Auto Refinancing Cons

• Your bad credit – If your credit situation has worsened ever since you financed your new car, you are likely to be approved for higher auto refinance rate and refinancing might not make any sense.
• Mileage of car – Your decision to refinance car may require you to keep the car for a much longer time period. This means more money will have to be spent on car’s mileage, maintenance, etc.
• Savings at risk – Extended loan duration can mean dishing out money from savings for paying monthly car instalments.