The Money-Saving Refinancing Move You've Never Considered

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refinance car loanMillions of homeowners have garnered huge savings in recent years from one simple move: refinancing their mortgages. Now, the refinancing craze has spread to an unexpected industry: car loans.

Plunging interest rates have been bad news for savers, but borrowers couldn't be happier. Mortgage rates have dropped around 3 percentage points from their levels just four years ago. That has translated into hundreds or even thousands of dollars in monthly savings on mortgages.

But the idea of refinancing a car loan never even occurs to many borrowers. After all, with many owners choosing to buy new vehicles even before their loans are paid off, it's often easier just to take advantage of financing deals from new-car dealers. Moreover, cars typically lose their value so quickly that the loans turn upside down -- meaning that the outstanding loan is more than the car is worth, making refinancing a tough proposition.

Still, the practice is growing in popularity. A recent SmartMoney article cited figures that showed auto refinancing applications have risen by about 30% from year-ago levels. Even a modest drop in interest rate can create real savings, and unlike mortgage refinancing, the costs of getting a car loan refinanced are low. That lets borrowers reach the breakeven point on a refinance easily.

Should You Do It?

If you have a car loan with a fairly high interest rate, you have nothing to lose by attempting take advantage of low rates by refinancing. Doing so could cut your monthly payment significantly.

But beware of catches and gimmicks. If you try to refinance through a dealer, don't fall for sales pitches trying to sell you unrelated products like warranty protection. Instead, emphasize your value to the dealer, not just with this transaction but with the promise of future business. That way, you'll hopefully get the best deal you possibly can.

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m_salah48

Rates have definitely helped keep real estate afloat. However, the real problems are unemployment, uncertainty, confidence in the economy, and tight mortgage lending standards.

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November 26 2013 at 6:20 AM Report abuse rate up rate down Reply
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March 25 2012 at 3:22 AM Report abuse rate up rate down Reply
robmerlaw

The government keeping interest rates artificially low just allows borrowers to continue to steal from savers - and this article actively promotes such theft.

March 08 2012 at 2:43 PM Report abuse rate up rate down Reply
robmerlaw

The government keeping interest rates artificially low just allows borrowers to continue to steal from savers - and this article actively promotes such theft.

March 08 2012 at 2:42 PM Report abuse rate up rate down Reply
Sunny Day

what nonesense, where is it?

March 06 2012 at 9:31 AM Report abuse rate up rate down Reply
nedfarn25

hi

March 06 2012 at 3:51 AM Report abuse rate up rate down Reply
wdebussey

Hey HuffPo, the teenagers running your site assigned the wrong link to this teaser.

March 06 2012 at 1:29 AM Report abuse +2 rate up rate down Reply
3 replies to wdebussey's comment
Danny Nobles

The money that you save by refinancing every month can be sensibly used to repay your unique loan or to upsurge your savings. Do not forget to search online for 123 Refinance they found 3.17% rate for me. They taught me how to refinance smart.

March 06 2012 at 12:57 AM Report abuse rate up rate down Reply
vlady1000

My son (works at a bank) has been doing this too. When he told me about it, I said but there is normally no equity in a used car, so why would a bank take that risk?. He said, it really does not matter as long as they have decent credit. I said "sure, and the banks said the same thing a few years back about lending on houses and look where that got them". The more I see how little banks understand about lending, the more I worry about our economic future/ It is like they are throwing out common sense and long term thinking, and just looking for the "get rich fast scheme". No collateral or equity should mean no loan, geeze the pawn brokers have more sense.

March 05 2012 at 11:58 PM Report abuse rate up rate down Reply