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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