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. And right now, interest rates are at record lows, while lenders are fighting it out for business. With this in mind, many borrowers, whether it be home owners or motorists, have taken to refinance their loan in order to achieve a more desirable outcome. Should you?
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, you will be looking for an interest rate on the market that is significantly 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?
Other options?
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. Especially in this climate, amid COVID-19, you might have some success in being able to achieve a better outcome. Nonetheless, don’t get your hopes too high either, as it isn’t likely you’ll be able to renegotiate any of the fixed terms to which you have previously agreed.
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.