Get a better deal on your debts, refinance your car loan | Mercury of Illawarra
Article in partnership with Drive.
With the New Year approaching, many people are still riding the crest of the big, beautiful wave that is their resolution. While for some that means shedding a few unwanted pounds, for many it will also mean getting rid of another kind of unwanted weight: debt.
To achieve this, you will need to manage your cash flow. That means making sure you’re not wasting money or paying more than necessary, which includes paying off your debts!
If you had bad credit or weren’t particularly wise when looking for financing, chances are you’ll probably pay higher interest rates, higher fees, and ultimately monthly repayments. higher than you should.
This can trap you in a cycle of debt that seems hard to get out of. After all, a large chunk of your paycheck disappears each week before you even see it. However, it does not need to be permanent.
By refinancing your debts, especially expensive debts like your car loan, you could save significant amounts of money every year.
So what is refinancing?
Refinancing is simply the process of moving from one lender to another. This can be particularly beneficial when dealing with debts such as auto loans, especially if you didn’t shop around or receive a competitive rate when you signed up.
Ultimately, refinancing is about taking back control of your finances and finding a new arrangement that works for you.
Obviously, for different people, this will mean different things. But, it can have distinct advantages.
What are the advantages of refinancing a car loan?
For some people, the biggest problem with their current loan is that the interest rate is just too high. By refinancing, you can shop around for a new lender who is willing to offer a more competitive interest rate, which may result in lower monthly repayments.
2 – Extend the loan to reduce your repayments
If you can’t get a better interest rate – which isn’t always possible – but you’re having difficulty with the current repayment, refinancing may still be a good short-term solution. By refinancing, you can extend the term of the loan, which will allow you to reduce your monthly repayments.
While this isn’t ideal in the long run – i.e. it will cost you more and take longer to repay the loan – it can be beneficial if you’re just looking to free up some extra cash in your budget.
3 – Get a better deal
Another huge benefit of refinancing is that it simply lets you shop around for a better deal. This includes the ability to find a loan with a better fee structure – especially if your current lender is charging you excessive fees – and getting more flexible loan terms.
For example, you may want to change your repayment schedules or have the ability to make additional repayments without incurring fees. You may even want the option of adding a “lump sum payment” to the end of your loan.
4 – Repay your loan faster
If your financial situation has improved since you took out your auto loan, you may want to pay it off as soon as possible. Refinancing can allow you to increase your monthly repayments and shorten the term of the loan, thereby reducing repayment time as well as your overall interest. It can also save you a lot of money in the long run.
5 – Take advantage of your best credit score
Perhaps more importantly, refinancing can help you leverage your improved credit score to make a more favorable arrangement.
One of the most common reasons people get stuck with bad loans is because they had a lower credit score when they applied for the loan. However, if your score has improved, refinancing is definitely an option worth considering.
If you refinance with Driva, their smart refinance platform will use your current credit profile to provide you with personalized quotes from a selection of their 30+ lenders. You will also need to give them some details about you, your current loan balance and the age of your vehicle.
Driveva will then be able to offer you personalized rates for which you are pre-qualified. Plus, all the rates you see include all fees and charges, so the amount shown is exactly what would come out of your account each month.
However, refinancing is not for everyone
If you only have a year or less on your current loan, it may not be worth refinancing, as many lenders will charge an exit or entry fee. If you don’t have a lot of time to pay off your loan, you need to make sure that refinancing your loan is financially worthwhile.
If you are not in a relatively strong financial position, you may also have difficulty finding a lender who will approve your loan application.
Finally, you will need to determine the value of your car before refinancing it. Cars depreciate over time. So your car is probably worth less than what you paid for.
In order to have the best chance of refinancing, it’s a good idea to make sure your car is currently worth more than what you currently owe.
Refinancing can be very beneficial if you’re looking to get a better deal on your existing car loan. If you’ve weighed the pros and cons and decided this is the right decision for you, visit driva.com.au to get started.