Refinancing a car loan helps you do a lot with the extra money. It is considered as a smart move in certain situations but you need to weigh the pros and cons before taking such a decision. Below we have mentioned 4 such ideal situations where refinancing your car loan not only make sense but also is the best choice.
Lower Interest Rates in the market
It is possible that you took a car loan when the interest rates were very high and hence have been paying higher EMI’s. But now interest rates might have dropped. Hence you can capitalize on this situation and refinance your car loan at lower interest rates.
Changing the lender
It’s possible that you might have purchased a dealer sourced car loan. In such situations, the dealer gives you the car after keeping his profit margin. Hence you end up paying higher EMI’s. So now you can compare loan options being provided by different lenders and accordingly choose the bank that suits your needs.
Your Credit score has improved
Since you have been paying your car loan diligently since 2 years without defaulting on any payments, your credit score has improved. So now you might be in a position to get good interest rate on refinancing your car. Please note that this option helps people who have been repaying their car loan EMI since a minimum of 12 months.
Changing the Loan Tenure
One of the major benefits of refinancing a car loan is increasing your loan tenure. Many a times it becomes tough for a person to repay the loan EMI. Hence by refinancing their car loan, they can increase the tenure. But you must note that doing so will mean that you will pay more than you initially were supposed to pay.
Refinancing a car loan is beneficial in these ideal situations as your budget is not affected and it also helps you plan your lifestyle, finances and future planning.