When is it best to refinance a car loan
How to Refinance a Car Loan (The Right Way)
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 this
video 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 so feel free to subscribe if
you're interested or at least give this video a like and 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
it 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 this far into the
video could you please just comment down below and say I'm still here so that I
know how many people are still watching this video thanks so now that you've
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
personally I just checked my local credit unions because they tend to have
the best rates or I'd check online which I'll talk about in a minute please just
make sure to pay close attention to the lenders contracts because I don't want
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
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 now once
again I'm Jason with honest finance and I make a lot of videos on different
topics that'll give your life and your finances more value so feel free to
subscribe if you want to or you can check out some of my other car related
videos over here that's all
