Refinance Used Car Loan

Have you bought yourself a car recently? And is this a used car we're talking about? Did you buy it from a dealer? Then there is a good chance you have also gotten your car financing plan through the dealer. If your car dealer is your lender, then prepare for a shock. Not only to car dealers mark up the prices of their cars, they also mark up the interest rate percentages that are applied to the car loan you have gotten through him.

Oftentimes, people just don't realize how shrewd car dealerships are. When the dealer offers them a payment plan, they think to themselves how easy and comfortable it is that they don't have to go look for a loan themselves. They simply take the car dealer up on his payment plan offer and end up paying many percentage points more on their used car loans.

It works like this. When a dealer offers you a car loan, a credit score check has to be run on you. So when the dealer gives your credit report to an external lender, the lender will get back to the dealer with a proposal. The lender might say that you, the buyer, are eligible for a 15% used car loan. Then the dealer marks up the 15% to 20% and voila... you're paying 20% APR on your car loan.

Refinancing A Used Car Loan

When people find out about this, they are usually not too happy. But you're not stuck to the car dealer's loan at all. You have the freedom to switch loans if you want. There are plenty of refinance used car loan services out there that are more than happy to give you another loan with lower interest rates.

This is possible because of decreasing interest rates as managed by the Federal Reserve. In the last few years, the interest rates have come down as a means of keeping the economy on life support. You can profit from this. As these interest rates come down, so do used car loan interest rates. By simply switching to a lower interest loan, you are cutting hundrends if not thousands of dollars from your total loan.

You get the greatest benefit when you refinance early on, when you have only made just a few payments. Refinancing half way through your loan also gives you some benefits, but less. Refinancing at the end of your loan is not recommended. It gives you a few days of hassle and the return on your efforts is minimal.