What is refinancing a loan and what does it do for me?

Feb

What is refinancing a loan and what does it do for me?

Archived in the category: refinancing

When I took out my car loan I had a higher interest rate because I didn’t have a lot of established credit. The guy at the bank I was working with said I should consider refinancing in a few months when I had built up my credit some more. What benefits does refinancing have and when is the best time to do it?

Auto finance is what I do for a living and while Jake is technically correct the real truth is bankers and sales people will say just about anything to make a sale and the truth is even after you have made say 12-payments as agreed the bank that your already financed with has no reason to lower your interest rate they already have a signed legal contract.

So if your not upside down in your loan (owe more then the car is worth) what you will have to do is find another bank or credit union to get a better loan and lower your payments.

Posted by: admin - 4 Comments

4 comments for “What is refinancing a loan and what does it do for me?”

Jake A

Refinancing a loan is just negotiating a better interest rate. Once you have made a few payments on time, your credit score, and your rating with that particular bank will improve, therefore they will be more likely to lower your interest rate. You just negotiate with them what you think would be good. remember, the better you are about paying on time, and more than the minimum payment, the lower they will be willing to go for you.
References :

February 23rd, 2010 at 1:58 am

Sandi-K

Refinancing means you are basically "re-doing" your loan, for lack of a better word. The bank will take the amount you owe and roll it into a new loan with a new interest rate. Basically, it’s a loan for a lower amount than what you started out with, and if you time it right, the interest can be quite a bit lower than on your first loan – all depending on the current rate and your credit.

Refinancing can lower your payment &/or decrease the amount of payments you make over time, all depending on what you want to do. The best time to do this is when interest is low. New borrowers pay higher interest because they pose a greater risk to the lender. Once you’ve established a solid payment history, it’s quite possible they will be willing to lower the interest rate, which means your payments may be lower. Your best nest is to wait more than just a few months to build up your credit before refinancing, depending on the length of your loan. Also, pay more than just the minimum amount due, which will make you look better as well.
References :
I used to run the credit dept. of a major retailer.

February 23rd, 2010 at 2:15 am

Doctor Deth

there is no way your credit score is going to change enough to matter "in a few months" – he was an idiot for saying that – maybe 2-3 yrs and the int rate still wont go down that much – you might save 10-20/mo at the most – BUT… once you drive the car out the dealership, it will probably be worth less than your loan balance until the last year of the loan, so it will be almost impossible to refinance
References :

February 23rd, 2010 at 2:27 am

SPIFIMAN1

Auto finance is what I do for a living and while Jake is technically correct the real truth is bankers and sales people will say just about anything to make a sale and the truth is even after you have made say 12-payments as agreed the bank that your already financed with has no reason to lower your interest rate they already have a signed legal contract.

So if your not upside down in your loan (owe more then the car is worth) what you will have to do is find another bank or credit union to get a better loan and lower your payments.
References :
Finance Manager for a car dealer for over 9-years.

February 23rd, 2010 at 2:36 am

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