| Response | |
|---|---|
| No | 63.97% |
| I have never had a car loan | 29.65% |
| Yes | 6.38% |
Refinancing a car loan means applying for a new loan and paying off the old one. You can refinance a car loan to get a better deal with a new lender and to get out of debt faster.
You should aim to refinance to a new car loan with fewer fees and a lower interest rate than your old one. This saves you money.
You have a $20,000 car loan with a 12% interest rate. It's a 4-year loan and after 1 year you've paid off $5,000. This leaves you with an outstanding debt of $15,000 over 3 years.
Since getting the loan your credit score has improved significantly. You are confident you can now get a much lower interest rate.
You find a new loan with a rate of 7%. After comparing the loan fees and repayments, you apply for a new 3-year loan and borrow $15,000.
At 12% over 4 years, your old car loan repayments were $527 a month. With your new, lower-rate loan the repayments are just $464 a month over 3 years.
Here are 3 similar car loans with different interest rates. You can see how the lower interest rate saves you money over time.
| Loan 1 | Loan 2 | Loan 3 | |
| Loan amount | $30,000 | $30,000 | $30,000 |
| Interest rate | 15% | 10% | 7% |
| Loan term | 4 years | 4 years | 4 years |
| Monthly repayment | $835 | $761 | $719 |
| Total loan cost | $40,077 | $36,523 | $34,483 |
Looking at these examples, loan 3 works out to be $2,040 cheaper than loan 2 and $5,594 cheaper than loan 1.
These are just simple examples and don't include loan fees.
Make sure you refinance to a new loan that's both cheaper than the old one and suitable for you.
Look at the new car loan's application and monthly fees, and any discharge or exit fees that come with your old one.
Let's say you have a 5-year loan term. After 2 years you decide to refinance to a new 5-year loan. This means you're actually extending your 5-year debt into a 7-year debt (2 years of the original loan plus 5 for the new one). This means you'll pay more interest over the longer term.
Choosing the right loan term is about finding a balance between manageable monthly repayments and the overall interest you pay.
If the loan term is too long you'll have small monthly repayments but your lender will get a lot more interest from you. A shorter term means higher monthly costs but you'll get out of debt faster.
There are some differences between car loans. Some have fixed or variable interest rates, and some allow you to make extra repayments.
Make sure your car is eligible for the new loan before you refinance. If your car is too old or the wrong model, you might not qualify for a particular loan.
Before refinancing, check your credit score. Many lenders determine your car loan's interest rate based partly on your credit score. If your score is good or excellent you have a strong chance of getting a good deal.
If your score has fallen since you took out the original car loan you'll probably need to improve your score before refinancing.
Cars lose value quickly, especially new ones. This can be a problem when refinancing if your car is used to secure the loan.
If you bought a brand new car worth $32,000 and it loses 10% of its value as soon as it's sold and a further 10% a year, after just 2 years the car would be worth $23,328.
If your car's depreciation outpaces the outstanding loan amount you might have a harder time refinancing. This is less of a problem if you've paid off a good chunk of the loan or if you paid some of the car's total cost upfront.
Every loan application impacts your credit score. Avoid applying for multiple car loans at once. You can only refinance to one loan, so find the best one for you, make sure you're eligible and then apply.
If your credit report has multiple loan enquiries then a lender will consider you a higher-risk borrower. You may end up on a higher rate or have your application rejected.
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Hello Sony,
Thank you for your comment.
Since you’re looking for refinancing options for your car, the guide above will give you ideas and tips on how to go about getting one. You may compare the car loan refinancing products above and click the Go to Site button of your preferred loan product.
Please make sure to meet all the criteria and the requirements before submitting the application. Please make sure that you’ve read the relevant T&Cs or PDS of the loan products before making a decision and consider whether the product is right for you. We also recommend that you get in touch with the lender.
Should you wish to have real-time answers to your questions, try our chat box on the lower right corner of our page.
Regards,
Jhezelyn
I have a car loan and I would like to refinance it somewhere else with a better interest rate
Hello Savvas,
Thank you for your question.
You are on the right page! :)
You may put your loan amount and the desired term on the calculator at the top of the comparison table. This will help you get the figures down for the loan you’re likely to be comfortable with in terms of repayments.
It is worth mentioning that you need to review the qualifications and the loan terms prior application.
Hope this helps.
Cheers,
Jonathan
Good Afternoon,
I am looking to refinance my Harley Davidson motorcycle. The interest rate is extremely high.
The only default I have is from over 5 years ago – no current credit cards, no credit issues.
Is there another option I have to re-finance? Payout figure is approximately $28K
Hi AJ,
Thanks for your question.
You may try contacting a motorcycle loan lender for your motorcycle refinancing options. Please note that your approval will be on a case-by-case basis so make sure to read the criteria and requirements before you apply.
Hope this helps.
Cheers,
May
I have an existing car loan and im wanting to borrow an extra $20000. Adding it to my loan. Is that possible? Is that refinancing?
Hi Bob,
Refinancing involves you taking out a new loan to pay out your existing loan, so borrowing an additional $20,000 on your existing loan is just “topping up” your loan. You’ll need to get in touch with your lender to find out if this is possible and what the process is to apply.
Hope this helps,
Elizabeth
Hi Roy,
As a financial comparison service we can’t offer you personal advice, but any of the lenders on the page above can help you with car loan refinancing. You can use the table above to compare them. You can also click the “Speak to a broker” tab if you’d like some advice from a car loan broker.
Hope this helps,
Elizabeth