I’m not sure if it is a secret, but I don’t hear much about one of the neatest deals around: refinancing your auto loan. Unlike mortgage refinances, that can cost thousands of dollars in taxes and fees, auto loan refinancing is very inexpensive and can help you save a bundle on your auto loan.
Let’s take the example of my friend, Sue. She has a car loan of approximately $30,000 and is currently paying 3.90% interest. Because she likes to be safe, she has taken out a five year loan even though she plans to pay it off sooner. Her current loan payment is $551 per month (ouch!) and she is six months into her loan. She’s added a few extra dollars each month, so her current loan balance is $27,000 and she has 54 months remaining on her loan.
Without too much searching, I can find her an interest rate of 1.79%. Either her monthly payment would drop by $31, or she could take three months of the term of her loan. Either way, that is an easy way to save.
If you have a higher interest rate or a larger loan, your payment could drop more dramatically. Of course, if you have a good interest rate now, or your loan is small, your savings will be less.
Where can you refinance an auto loan? I’d start by asking your current lender to meet the rates being offered by other banks or credit unions. You never know, they might just have a policy of meeting their competitor’s rates. (I’ve done it, it can work.) Next, check with any bank or credit union where you already have accounts, and ask if they do auto refinancing. Let me know if you find any great deals!