People often ascribe to the misguided notion that once they agree to a loan's terms they are trapped for the life of that loan. While it is true that one cannot simply walk away from a financial obligation easily, before making the ultimate choice to default or even file for bankruptcy, it is important to look for other options. Even with bad credit, lenders are willing to work with you to stay afloat. One such way to alleviate financial pressure is through refinancing your loans, and this includes auto loan refinancing.
A Really Good Choice for Bad Credit
While many people think refinancing is only for mortgages, auto loan refinancing is becoming more and more popular as more and more people are hitting financial walls. Through the process of refinancing your auto loan, you can lower your monthly payments and, hopefully, get the relief you need to secure your future. Lenders understand that those with bad credit are usually the ones in a position to need the help of a refinance loan, and many will sit down with you to work out the details.
This is because the benefit of a refinance is mutual. Banks want to make sure that they get all the money you owe them on your loan. If refinancing that loan to get you a lower monthly payment is the only way to do that, they are willing to work with your bad credit.
Auto Loan Refinancing: How Does It Work?
The process of refinancing a loan is far simpler than many people think. However, in order to accomplish a refinance, you need to first have paid down the principle of your initial auto loan. Basically, say you bought a new car for ,000 two years ago and took out a four year, or 48 month, loan. Over the course of the first 24 months, you likely paid about 0 per month, which has added up to ,000 paid.
During the refinance, you will look at how much you still owe (,000) and then take out a loan to cover that amount. However, rather than paying that ,000 over the final two years of your loan, you will now pay it off over four years. This can lower your payment to less than 0 a month.
Wait! There's One More Perk
In addition to lowering your monthly payment, you can use your refinance loan to get some cash from your vehicle's equity and still save on your monthly bills. If you want to take out an additional sum, say, ,000 on top of that ,000 by using your vehicle's equity (basically in a secured loan) you will need to borrow a total of ,000. However, that amount spread over four years will still only add up to about 5/month, which is still much lower than your initial 0/month payment.
Securing Your Future
Through the combination of a lower monthly payment and the money you get through the equity on your vehicle, you can make major strides in securing your financial future. The money you get from your refinance loan can go to paying other bills in a lump sum, and the 5 a month you have saved on your auto loan payments can go towards continuing to pay down debt or balance your budget.
Clearly, the extra cash from auto loan refinancing, both at the front and each month, can help you manage your finances better. This, in turn, should help to improve your bad credit. Auto refinance loans are a very versatile tool that can make a great improvement in your financial health.