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How to lower monthly payments by refinancing auto loans

You could actually lower your monthly auto payment by refinancing, if certain aspects of your credit or employment have changed since you financed the car in the first place.
Posted: June 5, 2012 - 5:18PM
Author: Don Bain

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The friendly folks at have produced a list explaining how to tell if you could benefit and a collateral tally of what you should know before you go looking for a cheaper loan.

"Most people do not realize they can keep their car, but trade in their lender to get a better loan," said Jim Landy, CEO of

Homeowners refinance frequently, whenever the prime rate changes enough to make it worth their while, and car owners may be able to take advantage of the same lower costs loans on their automobile or truck.

Furthermore, securing an auto loan at an improved interest rate is far easier than getting a home loan, even for those with less than perfect credit. You can get an auto loan right online – quickly, easily and from the comfort of your own home.

"We have seen a significant jump in the number of consumers successfully refinancing their auto loans; even so, it is still one of the best kept secrets in the auto finance world," continued Landy. "For car owners who purchased their vehicles when rates were much higher, or for those who did not do their homework and signed on at an exorbitant interest rate – or for those who simply need more available cash, refinancing could make perfect sense. But it is not for everyone, which is why we have put together a list of questions to ask before starting the process."

Will it work for you?
If you purchased the new or used vehicle during the last 12 to 36 months, interest rates may have become lower, meaning there may be a better deal available. If you’re credit rating has improved, that creates additional savings.

If your car is in good shape and you plan to keep it at least another three years, reduced payments could provide money to help keep it properly maintained, so you enjoy having it longer.

Will a few hundred dollars annually help your overall economy? Look over your budget. Refinancing could mean you pay more in the long run, but have more money in the meantime. If a little more cash could improve your quality of life, look into a new loan.

If your vehicle is a 2005 model or later, with less than 100,000 miles, or a collectible car with retained value, it should qualify for refinancing.

If you’ve been making your payments on time, refinancing approval should not be a problem, however your loan needs to be at least $10,000, as many lenders won’t bother with less. The greater the balance on your car loan, the more the potential savings on your monthly payment can be realized.
You must be able to understand your current terms to determine the advisability of refinancing. You need to understand the difference between the purchase price and the cost of financing, as the latter is important in the process. A close look at your existing loan will reveal if refinancing will work for you.

What you should know before proceeding
The online process should be easy and quick to accomplish given you are prepared for the process. If you have recently purchased the vehicle, the title must have clear the local Dept. of Motor Vehicles, a process that can easily take 3 months or more in todays cash-strapped states.

You should also know who the current lender is and if the dealer arranged financing this can also take a while. That’s one reason a vehicle bought at least a year ago as a good starting point – all these concerns should have been finalized by then.

Gather all the needed paperwork, including proof of employment and income; insurance confirmation, identity documents, the car’s make, model, mileage, description and VIN.

First, get online to find the ambient interest rates, terms and payment schedules for comparison to your present loan.

It is possible to fulfill the entire refinance process online, but make sure it’s via a reputable site with online refinance applications, timely approvals. The whole process can be completed from the comfort of your own home.

Here’s as extreme example of how a refinance can free up monthly cash from your payment thanks to A monthly payment for a $30,000 auto loan of 72 months at 13% interest would be $602.22. After 36 payments, the balance would be $17,873. A new 72-month loan for that new balance at 13% interest would result in a monthly payment of $358.78, a reduction of $243.44 per month.

That example uses an identical interest rate for both loan computations. With the lower rates possible given today’s prime rate and an improved credit rating, the worthiness of this idea is readily apparent. So go ahead and keep the car, just trade in the lender.

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Anonymous (not verified)    June 6, 2012 - 8:06AM

In today’s time where inflation rate is so high, fulfilling of this dream is impossible, as the value of the property is also increasing. However, the person does not have to worry about this, as one can fulfill their dream by going for home loan.