As many who have taken on some form of financing or another will attest to, locking in a low interest rate can save you a fortune. The reason for this is that as economic and market events transpire, the attractiveness of a specific loan may rapidly change as underlying rates also begin to differ. Therefore, if you have a car loan, it may be wise to consider refinancing the agreement to attain a more competitive outcome, or to make it more manageable.
How do market rates fare?
To decide whether you should refinance your car, it’s important you first take into account your other options. It is the differential in rates where you stand to save on repayments, so head straight to the market and look at what the competition is offering. You may even opt to engage a finance specialist to help you weigh up your options.
Ultimately however, you will be looking for an interest rate on the market that is markedly less than the one you are already committed to, or with better terms. If the rates available on the market are more or less similar to what you already pay, then refinancing your loan could prove a fruitless exercise once you factor in costs to transfer your loan.
Is it cost effective to refinance?
Once you’ve gauged the availability of lower interest rates on the market, the next thing is to look at the specific terms of your existing loan. It’s not uncommon for financiers to include exit fees or transfer fees, both of which could negate any savings from lower repayments.
The devil is in the detail, so carefully examine the current loan, as well as the prospective one for its own ancillary fees and charges. If the prospective loan offers greater flexibility by way of the terms concerning repayments or other matters, then you may be more motivated to transfer your car loan balance – even if the rate is not too dissimilar. Consider, if you are going to be charged to pay off your loan earlier than scheduled, when your existing provider doesn’t do so, will it be in your best interests?
If you’re finding yourself penned into a corner with your existing loan, and other options are not necessarily incentivising enough to make the transfer, reach out to your current financier. Although you may struggle to renegotiate any of the fixed terms to which you have previously agreed, they may be able to work with you to introduce some other options to make repayment of the loan more realistic for all parties concerned. Don’t rely on this being anything near a forgone act of charity however, more so as another alternative to take into account.
The Fincar team is here to help you with all your financing needs. Contact us today to help arrange your next car or equipment loan.