refinancing a car is a really good way to save money but you’ve got to understand how to do it properly in order to not get screwed so in I’m gonna teach you
how to refinance a car loan and I’m gonna tell
you why you’d want to do it now if you just found this channel I’m Jason with honest finance and I make a lot of videos on different financial topics that’ll give your life and your finances
more value now let’s talk about
car loan refinancing okay so refinancing a car is not that complicated to do but I’ve got to break it up into two different parts which are the why and the how so that all of this stuff makes sense so let’s start with why you should refinance your car loan well the main reason why you probably want to refinance your car loan is because you just want to get a better interest rate than the current loan that you have already this is especially true if you’ve already got a bad rate on your loan because as long as you’ve made your payments on time and you have better credit then you’re probably gonna get a much better rate and that’s gonna save you a lot of money because let’s just say that you currently owe $20,000 on
your loan at 11 percent Interest and you still have three years left to pay off the loan well with those numbers you’re gonna be paying about a hundred and eighty bucks a month in interest which is a total ripoff but if you refinance that loan to let’s say five percent Interest then you’d only be paying about
$80 a month of interest which is so much better and that’s still on a three-year term and on top of all of that stuff your monthly payments are also going to go down and in this case if you really wanted to pay off the car loan faster than I would just pretend that your payment’s were the same as your old ones
that way you’re paying extra on the car loan and you can pay it off faster now the other reason why you might want to refinance your car loan is because you just can’t afford the payments but pay attention here because I want you to understand what you’re doing if this is the route you’re gonna take simply by
refinancing your car loan and extending
its length your payment’s are gonna go down even if the interest rate goes up just a little bit and this is all
because of the length of the loan because if you’ve got a car loan that has three years on it and then you turn mit into a six year then you’re gonna save a lot of money in your monthly payments even if that interest rate did go up just a little bit but I would HIGHLY advise that you don’t take this
route and you just try to make your monthly payments or just sell your car
because you probably afford it and the main reason I say this is because cars are depreciating assets so the longer you have a loan with a car the more likely you are that you’re gonna end up upside down in the loan and being upside down in your car loan means that you owe more than it’s worth which is not a good thing and you’ve got to understand here that when your car loan is way too long you’re gonna be paying too much in interest and your car’s gonna depreciate a lot faster than
you’re actually paying it off don’t be deceived by a lower monthly payment because it’s all a lie if all you’re doing is stretching out the loan just try to refinance your car loan to a length that’s either the same or shorter than the one that you already have because that’s going to give you the best value you’re gonna end up paying off the car a lot faster you’re gonna pay a ton less in interest and the risk of going upside down in your car is going to go down significantly because of the shorter loan now I did make a video on how car loan interest works so if you need some help in that area then I’ll just put it right here and you can watch that video too now I also want to ,mention cash out refinancing which means
that you actually cash out on some of the equity from your car so let’s just pretend that you owe $10,000 on your car.
but it’s actually worth $15,000 well you could get a cash out refinance for about $12,000 that way you get to keep $2,000 for yourself and then you just use the other ten for the financing that was already required you can spend the cash out money however you’d like but I still want to warn you that cars are depreciating assets and I want you to keep that loan as low as you can you’ve still got to pay interest on the money that you’re cashing out so just keep that in mind as well I mean in theory you could use the cash out money to pay off loans that have higher interest rates but I mean seriously.
who’s gonna do that just be smart about the reasons why you want to refinance your car loan and do the math before you sign any paperwork so if it were me personally the only reason why I’d
refinance a car loan is just to save money on interest and that’s about it now if you’ve made it
decided that you want to refinance your car loan I’m gonna teach you how to do it so pay attention here now if you want to get a better rate on your car loan you’re gonna have to have good credit or you’re gonna have to find a cosigner that has good credit there’s no way around this but as long as you’ve made.
your payments on time then your credit should have gone up naturally you can get loans with bad credit but trust me they’re just a total ripoff and you’re better off just establishing good credit before you start to borrow money now this is obvious but if you want to get the best rates when you’re borrowing money then you have to have good credit like I’ve said over and over again and now let’s move on to finding a lender which is really easy to do if it were me m personally I just checked my local m credit unions because they tend to have the best rates or I’d check online which m I’ll talk about in a minute please just make sure to pay close attention to the lenders contracts because I don’t want m you paying any prepayment penalties and I don’t want you to have an origination fee either trust me you don’t want to
have to pay a fee just for paying off m your loan early and origination fees can range anywhere from 1 to 6 percent of the total of the loans value so let’s say that you borrow $10,000 with an origination fee of 5% well that’s an instant 500 bucks that you’re just wasting because of that fee and please if you do refinance your car and it happens to be around the same time that your current payment is due just make sure that everything is paid off correctly because I don’t want you to accidentally have a late payment just
pay attention to that kind of stuff because accidents do happen especially when the timing is not perfect now as far as online lenders go I would highly recommend checking out light stream.
loans because they’ve got the best rates that I’ve found and they’ll beat any competitors rate as well light stream doesn’t charge any dirty origination fees and they don’t have prepayment penalties on their loans as well I currently have a personal loan with them and they’ve been really easy to work with and I did get the money the same day that I applied which was freakin sweet now I’m not sponsored by a light stream
I just want you guys to know that there’s a ton of crap loans out there and these guys really do a good job with being honest with their customers now I’ve got an affiliate link down in the description below if you want to check them out or just go with whomever you’d prefer just be responsible with how you borrow money and I promise you you’re gonna end up in a much better situation.
but at least now you know how to refinance a car the right way
thanks
