![]() The lower interest rate helps reduce how much extra money you have to pay on the loan overall because you lengthened the term. This can reduce your monthly payments while lowering your interest rate. If you’ve got excellent credit but your income is small or unpredictable, you can combine the two approaches and refinance to get a lower interest rate with an extended car loan term. But if keeping your vehicle is that important to you, it may be worth the added cost. That means, even with the same interest rate, you’ll be paying more money in the long run for your vehicle. Though you’ll be making smaller car payments each month, you make more of them. Now you have five years until your car is fully paid off.īut beware of the catch. You refinanced and were able to cut your monthly payment in half. For example, say you had just two years left on your car loan but you were struggling to make the payments. If your credit score hasn’t gone up, or you otherwise can’t refinance your car loan with a lower interest rate, you still have the option to extend your loan’s term. Depending on how much lower your interest rate is, you could enjoy noticeably lower monthly car payments. If your credit score has gone up significantly since you first bought your car, or you took out your car loan when interest rates were high, there’s a decent chance you can refinance your car loan with a lower interest rate. This allows you to make smaller payments over a longer period of time. Second, you extend the term of your car loan. There are three ways you can do this.įirst, you get a lower interest rate on the new loan. So what’s the point? The point is to make the monthly payments for your car more affordable by making them smaller. If you do this, you’ll replace one monthly car payment with another one. In most cases, the new loan will come from a new lender. If you refinance your car’s original loan, it means you take out a new loan and use the proceeds from it to pay off the old loan. While your chances of keeping your car are better if you have a high credit score, you can avoid defaulting on your auto loan even if you don’t have the best credit history. If you can’t afford to make your car payments, it might seem like losing your vehicle is inevitable. Let’s start by examining what you can do if you want to keep your vehicle. You have several options, some of which will allow you to keep your car and others that require you to let it go. But due to a significant change in your finances, you can no longer afford them. At the time of purchase, you could easily afford your monthly car payments. ![]() And like most car buyers, you took out a loan to help pay for it.
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