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While everyone is aware that you can refinance your mortgage, not
everyone knows that it is also possible to refinance your car loan. In fact,
last year 1.1million car loans worth $23 billion were refinanced, which is
still a small fraction of the $1.6 trillion in outstanding car loans.
Years ago it didn’t make sense to refinance a car loan because cars
didn’t cost that much and didn’t last long enough to make it worthwhile.
But now the average car sells for more than $25,000, the average car
loan is for 5 years and the car lasts an average of 13 years, with the
average holding period being 7 years for each owner, so it makes more
sense to refinance
Additionally, as interest rates have fallen in the last few years, so have
car loan rates, so there is enough of a spread to make it worth doing.
You can refinance a car loan you might have taken out for 8-9 % two or
three years ago to as low as 5.7%. In order to get this rate, though, you
have to have good credit and repay the loan in a shorter time than the
original loan. So if the original was a 5-year loan, you may refinance to a
3 1/2 or 4 year loan.
So if you have a high car loan rate, where do you go to refinance? Not
the captive financing arm of the car dealers like GMAC or Ford Credit,
whose job is to sell new cars, not make loans cheaper for consumers.
The best place to go is ELoan.
They, like other online lenders, will typically give you a response in 15 minutes or
less as long as you give them everything they need to approve your loan
such as your Social Security number and the VIN number of the car to
be refinanced.
Your car has to have held its resale value, because they won’t lend on a
car that has depreciated below the amount of the loan. But if you have
good credit and a car that is in good shape, it is certainly worth a few
minutes at these and other websites to see if you can save some money
refinancing your car.
Jordan E. Goodman is America's Money Answers Man. He is a regular contributor to Public Radio International's The Marketplace Morning
Report and appears frequently on NBC's The Today Show, PBS, MSNBC, CNN, CNBC, and Nightline. For 18 years, Mr. Goodman was on the editorial staff of Money magazine, where he served as Wall Street correspondent, in addition to his role as weekly financial analyst on NBC News at Sunrise for 9 years.
He is the author of Everyone's Money Book (over 200,000 copies sold) with 6 special focus editions on College, Credit, Financial Planning, Real Estate, Retirement Planning and Stocks, Bonds and Mutual Funds and the co-author of Barron's Dictionary of Finance and Investment
Terms.
His website MoneyAnswers.com is full of resources, tips and strategies you can use to build a solid financial future.
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