Probably. Many consumers are paying more than they need to pay, whether they are prime, near-prime or “subprime” borrowers, or even have no previous credit history.
What can you do about it? Have you considered refinancing your auto loan?
Refinancing isn’t just for home loans (mortgages) any more, although that’s the way most people think about it. And it has gotten easier with the availability of consumer-direct lenders on the Internet.
If you have a high-interest car loan, you may want to consider refinancing it for the same reasons you might decide to refinance your home mortgage: to lower your interest rate and monthly payments, shorten the length of your loan, even pay off other bills. And this is especially true if interest rates have declined or if your credit score has improved since you took out your car loan.
The overall benefits of refinancing are the same regardless of whether you are a prime, near-prime, subprime or first-time borrower. The interest rate and payment amounts involved may change, but not that fact that you’ll save money now and over the full term of the loan by refinancing when the time and circumstances are right. A borrower with a good credit rating will find more options, but all categories of borrowers are likely to save money by refinancing their old car loan.
“You might be surprised just how much refinancing your auto loan could save you each month,” says RoadLoans.com, an Internet-only, consumer-direct lender.
“Any time auto refinance rates have dropped at least one percentage point, it is worth your time to consider refinancing,” according to RoadLoans. “As little as a one point drop in auto refinance rates could lower your monthly payment as much as $100 a month.”
One way to see how much difference a drop in auto refinance rates can make in your monthly payment is to use an auto loan calculator, available on many Internet finance and lending sites, including roadloans.com. “By trying out various interest rates, you can see quickly and easily when auto refinance rates reach a level where you are saving enough that you would definitely want to refinance.”
In the example we tried, the payment over a 48-month term on a $15,000 loan dropped from $369.72 per month to $342 per month as the APR went from 8.5 percent to 4.5 percent. That’s a savings of $27.72 a month, $332.64 a year, and $1,330.56 over the remaining term of the loan.
Of course, the higher the original loan amount; the higher the starting interest rate, and the longer the term of the loan, the bigger the savings get – even for an average for a used car, as in our example.
“Today might just be the perfect day to consider auto refinance,” said one online lender. “Rates are down, and lower interest rates mean lower monthly payments. Having a lower payment means more money in your pocket every month … that you could spend on something besides your car payment.”