Car ownership can be expensive. Apart from rent or mortgage, paying for your car can be one of your biggest household expenses.
According to AAA, the average cost of owning and operating a vehicle is $ 9,666 per yearand even more if you drive further or own a larger car.
Fortunately, there are some pretty simple ways to save on car costs without sacrificing a lot of sacrifices. One of the easiest ways is to evaluate your car loan and see if you can save by refinancing.
Should you refinance a car loan?
On average, a new car costs over $ 42,000. If you don’t have enough cash in your bank account (and some of us do), you will need to pay at least some of these costs.
At record low interest rates, refinancing a car loan can save you a significant amount of money, especially if your credit rating has recently improved or you initially financed with a high interest rate.
Even if you think you’ve gotten a good discount on your borrowing costs, you can pay (literally) to check your refinancing options. According to Gravity Lending, their clients save an average of $ 134 per month after refinancing.
5 benefits of refinancing
If savings are not enough, refinancing a car loan can provide additional benefits. Here are five of the biggest.
1. Get the best interest rate
Perhaps one of the most common reasons people refinance their car loan is to get the best interest rate. Over the average life of a car loan, you can save thousands of dollars in interest payments by lowering your interest rate by just one or two points.
For example, if you financed a $ 40,000 new car purchase over a five-year period at 6% interest, you must pay $ 6,399 in interest over the five-year period. If you could refinance at a 3% interest rate, that would reduce your total interest payments to $ 3,125. a whopping $ 3,274 savings over the loan term! Not bad for a few minutes of work.
If you originally financed your car purchase several years ago, you may be paying a higher interest rate than necessary. Interest rates continue to hover around historic lows.
And if you financed through a dealer, you should double check your interest rate. Dealer financing is often a way for them to generate additional income and does not always compete with other alternatives.
> Click here to see if you can lower your interest rate (it takes 90 seconds or less)
2. Reduce your monthly payment
If your household budget has changed and your other expenses have increased (hey, life sometimes happens), it makes sense to provide a lower monthly car rent.
One way to do this is to lower your interest rate, which is the first thing you should try to do because it’s free money. But another way is to extend the term of the loan.
For example, if you took out a three-year loan and your payment for a car is $ 600 a month, extending the term to five years, you can lower your payment to $ 377 even without lowering your interest rate. While you will have to make payments for an additional 24 months, those $ 200+ savings each month can make a difference in balancing your budget and preventing late fees or credit card debt accumulating.
> Find out how much you can reduce your monthly payment with Gravity Lending
3. Shorten the loan term
On the other hand, if you have room in your budget and can afford additional payments, refinancing a car loan for a shorter period can help you save money in the long run.
The longer the term of your loan, the more interest you will pay over the term of the loan. If you can make higher payments each month, you can save a significant amount of interest. Plus, once your car is paid for, you free up that money to top up your emergency fund or invest in your retirement!
It may sound counterintuitive, but higher car bills can ultimately save you money if you have extra money every month.
4. Add fringe benefits for credit policy.
Depending on your current loan, you may be missing out on some of the benefits that can help protect you in the event of an emergency.
For example, Guaranteed Asset Protection or GAP coverage can cover the difference between your debt and the value of your car in the event of a total loss.
While these benefits come with some additional costs, they might be worth the trade-off depending on your circumstances. Some other products you can take advantage of when refinancing include:
- Wear protection – Reimburse up to USD 10,000 from the vehicle’s equity in excess of the insurance indemnity amount.
- Automotive debt protection – protects you in case of unexpected loss of income
- Car service agreement – extends the manufacturer’s warranty and includes protection against costly repairs
- Vehicle protection plan – protects your car from repair costs due to unforeseen problems
> Click here to find out more about the products you can add to your auto loan refinancing.
5. Take advantage of an improved credit score
If your credit rating has improved since you first applied for a car loan, find out if you can refinance with a better interest rate or terms.
It’s always a good idea to keep track of your credit score. If needed, you can get a free copy of your credit report from AnnualCreditReport.com.
If you made payments on your current car loan and other credit accounts on time, chances are good that your account has improved. Even a small improvement in your credit rating can help you qualify for a lower interest rate, and you have nothing to lose if you look at what other refinancing options are available to you.
> See if you qualify for a lower interest rate at Gravity Lending
How to Refinance Your Car with Gravity Lending
While it’s clear that Gravity Lending is sponsoring this post, I don’t recommend any service that I haven’t researched and tested myself. And I can safely say that Gravity Lending should be at the top of your list if you are considering refinancing your car loan.
It’s been a while since I financed my own car, but I don’t remember getting it as easy as it is now. One of the benefits of Gravity Lending is that with one online application, you can get multiple offers from lenders across the country that are competing for your business.
In addition, they have a 4.9 average review score, are the most highly rated car refinancing company, and are rated A + by the Better Business Bureau so you can be confident in the service they provide.
If you’re still struggling, here are some statistics about Gravity Lending:
- Average customer saves $ 134 per month and $ 2,846 in total for car loans.
- Interest rates from 1.99%
- Loan terms between 24-84 months
- Wait up to 90 days before making your first payment
- Easy online application process (you can complete it from your phone!)
> Click here to find out how much you can save on a car loan with Gravity Finance