In the last few weeks mortgage refinancing rates have shot up 1%, meaning it’s probably too late to get the best rate if you waited too long to refinance your house. But there is another type of refinancing that can also save you a bunch of money, auto loans, and the rates are still ridiculously low. This refinance car loan calculator will show you just how much you can save.
You have heard a lot about refinancing mortgage loans, it’s in the news on a daily basis. A lot of people don’t know they can also refinance auto loans, and it is much easier than refinancing your mortgage. Since new mortgage rules have gone into place refinancing your mortgage has become a nightmare. It takes months to close, requires weeks of gathering information to provide to your lender, its expensive to do, and it’s difficult to qualify even after going through all that.
Auto loan refinances on the other hand are easy. I have refinanced auto loans several times with a few different lenders and the experience is always the same. It takes me about 15-30 minutes to apply, I get instant approval, the paperwork to close the deal takes no more than an hour, there are no fees, and the whole thing is over and done with in no more than a few days. Easy.
In the long run you won’t save as much as if you refinance your mortgage, but the savings can be significant. According to ABC News, the average car loan balance in the United States is $13,260. According to the federal reserve, the average interest rate on an auto loan is 4.69%. So the average two car family is paying an average of $1,244 in interest every year.
The above average family, however knows that if they look on bankrate.com or at the advertisement at the bottom of this page, they can find much lower rates.
When I looked today I found more than one financial institution offering auto refinance loans at 1.75%. When the above average family refinances their cars to those lower rates, they will only be paying $464 in interest ever year, a savings of $780/ year. Use this calculator to see how much you could save over the next year:
That’s obviously a lot of money, but some people might be worried about taking on new debt. If you have already been paying on your five year loan for a year or two taking out a new five year loan will just mean it takes longer before the car is already paid off. I wouldn’t worry about this though. Financial institutions are willing to be fairly flexible with their auto loans and might offer you various options like keeping the length of your loan the same, but lowering your monthly payment. Another option might be to keep your payment the same, but lower the length of your loan, which is a great way to get out of debt faster.
But those aren’t the options I would recommend. At 1.75%, your new auto loan will actually be lower than the rate of inflation meaning that in inflation adjusted terms, you will be paying back less money than you borrowed. In other words, it’s basically free money you have to pay back at 0% once you adjust for inflation. For that reason, I think your better off taking the longest term your financial institution will give you and using the extra money you save every month to pay off whatever other debt you have that has an interest rate higher than 1.75%.
An even better idea is to never take out an auto loan and only buy cars you can afford to pay cash for. But, that is another article.