Refinancing Your Auto Loan

For every customer that buys a new car and has circumstances change, there are many different reasons for wanting to refinance his auto loan. Probably the most common among these is the ability to lower the monthly stipend that becomes due on a certain day each pay period, but there are others that also should be considered for customers who want to perform this kind of financial action.

All of the different situations should be at least looked at before deciding to dismiss the ones that don't make a lot of sense to the borrower.

The first type of scenario that many people are encountering these days is a divorce, and while this can be quite painful emotionally, there is also a tremendous financial aspect that needs to be considered as well. When two people are married, both of their names go on every type of document possible, and this of course means an automobile purchase agreement, so it is wise to make sure that only the owner maintains his/her signature on this contract.

Legally, if the car is in one person's name, but the ex is still responsible for making the payments, any kind of financial burden will fall on the partner who was assigned the duty of completing the contract on time. This can be a credit card issue too, if both parties are still on the contract, but the person who is responsible for the payments does not make them in a timely fashion.

Unfortunately, this is a common occurrence, and both parties eventually suffer -- financially and otherwise, since the credit bureaus will record this inactivity on the credit score. These actions will unfortunately end up on the credit file for a minimum of 7 years, affecting a person's credit score and causing him considerable financial hardship over that period of time.

Another great course of action is to remove any person who had to originally co-sign a loan agreement in the first place, whether this was a parent, grandparent, or close friend. Most first time purchasers of automobiles typically have no credit history, and therefore won't even qualify for a loan application, necessitating the need to have another responsible party to agree to be a co-signer.

Once credit is established for the primary owner of the automobile (usually a period of 1 year is sufficient for this purpose), it would behoove him to refinance the loan solely in his name to start earning points with the credit bureaus. This action will also remove the responsibility of the other party, so if they want, they can help out another young person who finds herself in the same financial situation.

Another great idea to consider is to use the available refinancing for a lower payment plan, since the car dealerships can charge exorbitant rate for certain customers if they don't qualify for the lower interest bracket. This can result in a significant savings for most patrons who aren't stuck with this contract for the balance of the original agree length. Any kind of increase made by the dealership results in the possibility of paying many hundreds of dollars more than what should be owed for this vehicle. In effect, this overpayment is sheer profit on the part of the dealer who is more than willing to continue raking in the profits by their actions.

Finally, there are now lower monthly rates available -- especially if somebody has improved their credit standing in the last year or two. This makes perfect sense for the consumer who is able to lower his monthly payments by anywhere from $10 to $50 a month or more. But it is certainly worth checking out what types of financing are available in order to pay down the monthly installments and make it easier for the monthly budget to be allocated. Of course this will be different with every customer, but most finance companies can at least look at the current agreement to see if there is anything that they can do to lower the interest rates.

This simple action can result in savings each month, which over the long haul can mean thousands of dollars for the length of the current loan.

There is only a relative small cost to refinance such a loan, and it typically will run anywhere from $5 to $60, depending on the financial lender that is contacted. For the amount of savings that is realized due to this type of action, refinancing may be the best way for most consumers to recoup some of their money.