America is the home of automobiles. Right from the time of Henry Ford the auto industry has been part of an American ethos. America produces nearly 10 million cars in a year. A vast majority of these cars are financed by loans from banks and other financial institutions. Most Americans who opt to buy any car like a Ford or Honda use auto finance as a tool to possess the car.
What is Auto Refinance
Auto Refinance is another loan taken by the car owner who already has an ongoing loan on his car. In this case the earlier loan is fore closed and the fresh loan is renegotiated. Its similar to a mortgage refinance with the difference that here the asset is movable and not fixed.
Once you have car and there is an ongoing loan the first step is to look for a financer who can carry out your auto refinance. This could be a new financer or your original financer could also help your auto refinance. The next step is that the financer or lender first fore closes the old loan. Thus he pays the outstanding loan to the original lender. The title of the vehicle is then transferred to the new financer or lender. In case the exercise is being carried out by the original lender then this step is obviated.
Reasons for Auto Re-finance
There are many reasons that could give an impetus to a car owner to go in for auto refinance. One of the major reasons is to get a lower rate of interest. Once you get this lower rate of interest it immediately translates to lower monthly installment for your car. And this in turn translates to greater savings for the car owner.
We must remember that the present decade has seen very low auto finance rates. Thus in case you have taken out a car loan earlier at a higher rate, it s good business sense to go in for a auto refinance option and reduce your interest liability.
Auto refinance is a highly personal decision. A person taking out an auto refinance must decide what his aim is. There are many options or reasons. One of them is that the car owner may want to reduce his interest payment. In that case he may go in for an auto refinance with the same period but a lower rate of interest. With a lower rate of interest the monthly outgoing will be reduced. Alternatively a car owner may decide that he needs to extend his loan over a longer period to translate it into lower monthly installments. This is a good idea though it would entail his paying more interest as the payment period is extended.
All auto refinance loans do come with a small rider. This is in the form of fees that are to be paid to the lender. These fees are fairly small in comparison to Home refinance. They usually work out to $5-$15 for the transfer of lien in the auto refinance. You will also have to pay state registration fees which are a little higher and can vary from $5 -$75. These estimated fees may vary by lender, state of residence, etc.
Again do carry out a check to insure that your existing financer does not have nay pre-payment fees. In that case you will have to take these fees into account while carrying out your auto refinance.