Unfortunately, having money troubles from time to time is a part of life. There are numerous ways that you can get out of debt and free up money in your life, and one of those ways is to refinance your car loan.
First, when done wisely, refinancing your car loan can be a good decision. It can help you lower your monthly payments by a considerable amount each month. This extra money can be put towards anything that you might need, from paying down back bills to creating a nest egg of savings.
However, refinancing a car loan does have some negative effects. It will reflect on your credit report and will increase your debt to income ratio. It will also mean you pay more for the car in the long run.
Refinancing a car loan lowers your monthly payments, but increases the amount of interest that you will owe on the loan. In some instances, this can tack on thousands of extra dollars to your loan, which might not be the best thing to do in the long run. In addition, it keeps you in debt for a longer period of time. Generally, car loans are extended by several years during the refinancing process, forcing you to continue paying on that car long after it would have been paid off had you not refinanced.
Refinancing can be a good decision, but not in all situations. Think very carefully before you decide that this route is right for you, and don’t rush into anything because money is tight.