Car Loan Refinance Calculator.
Sometimes, we get uncomfortable with the terms in which we got a particular car loan. You might want
to reduce the interest you pay monthly and thereby reducing your monthly payments. You should
consider refinancing your car loan.
However, you might have only a little idea of what it means to refinance your auto loan. Therefore, I
will tell you all you need to know about car loan refinancing.
Read Also: How Many Times Can You Refinance Your Car
Refinancing a car loan might not be suitable for everyone, so you should put some factors into
consideration before proceeding to do so.
Still don’t understand the concept? No worries, we will go into full details now.
What is Car Loan Refinance Calculator?
Car loan Refinance is simply the process of taking a fresh loan to pay off your current or existing car
loan. Very straightforward.
This refinancing is usually a good option when you wish to lower the monthly interest rate of your
current car loan. Thereby applying for a new one to change the terms of the former.
After acquiring a car loan, you might just find another loan with a lower interest rate, which wasn’t
available earlier. To avoid continuing your current loan repayment with high interest, the best option is
just to take the new loan with a lower interest and pay off the former loan.
Also, a loan with a longer payment tenure tends to attract more interest than one with a shorter
payment duration. If you see a loan whose tenure is shorter than the one you have gotten, try applying
for it and immediately pay off your first loan.
However, a car loan Refinancing which is actually meant to reduce the money outflow from your
pocket, might end up increasing it. This is why you must know why and when car loan Refinancing is a
In addition, you need to consider other factors and also calculate how much you can save using these
But, can you go through the stress of adding up and subtracting series of figures just to arrive at a
conclusion? No! Therefore, to ease you of this avoidable stress, we have provided an instrument to
help you with that. It is known as the Car Loan Refinance Calculator.
The Car Loan Refinance Calculator is an instrument that is used to determine how much you can save up
if you decide to refinance your car loan.
All you have to do is to input the specified parameters into the required boxes, and the system will
automatically generate a suitable result for you.
From this result, you will find out if you should go ahead to refinance your car loan or just move on with
your existing loan.
Another interesting thing about the calculator is that it tells you how much you can save if you decide to
refinance your car loan.
Why should you refinance your Car Loan?
In most cases, refinancing a car loan can help you save more money than you could think of. It offers
you an opportunity to pay off your former loan with a new one, which has a lower interest rate or
shorter repayment duration or a combination of both.
For example, if the Annual Percentage Rate (APR) of your current loan is 12% and luckily, you found a
new one with an APR of 10% , refinancing the former loan could be a very good idea in this case.
Also, let us say your current car loan has a repayment tenure of 3 years, and the new one has a
repayment tenure of 2 years, just pay off the existing loan with a new one. It is the best option here.
Again, you can decide to refinance your car loan if you have an improved credit score. Whenever we
take loans, a credit score is usually given to we, the borrowers, when we pay back.
The credit score is determined by how fast you repay your loans. And moreover, it determines the
terms of future loans.
So, if as at when you took your car loan, you had a credit score of 5, and after months, you have a
credit score of 12, it will be advisable to refinance your car loan, because you will surely get lower
interest rates, due to your improved credit score.
In addition, refinancing is a great idea if you will like to repay your current car loan more quickly. Like I
said earlier, greater time attracts greater interests.
Furthermore, it is advisable to refinance your car loan if you need a break of paying back for a short
time. After borrowing a new loan to pay off the previous one, you get a short time before the
repayment of the new loan.
This time gives you an opportunity to spend your money on other things rather than refunding loans.
You can allocate the funds to other parts of your life.
However, you might be the type who prefers long term loans to short term ones. In one way or the
other, this will be suitable for you. If you find a new loan which has long term repayment duration
compared to your current one, then you can go ahead to refinance.
Why should you not refinance your Car Loan?
As there are reasons, you should refinance your car loan, similarly, there are reasons you shouldn't
even go close to it. I will highlight those reasons here.
First, if your current car loan has prepayment penalties, do not refinance. Car Loan Refinance has to do
with paying off your existing loan, and it is a bad idea here. But not a very bad one, as I will teach you
how to handle situations like this later in this article.
Some money lenders/Lending Bodies, attach prepayment penalties to the loan agreement. This means
that you will pay a specified sum of money if you complete the loan repayment before the agreed
Therefore, instead of spending the amount you could save for your car loan refinancing on a loan
repayment penalty, why not just leave it in the first place. Just continue paying your monthly dues, and
it will be up in no time. Do not bother to refinance if you are in this situation.
However, you can decide to refinance if the repayment penalty is not up to the amount you will save
from refinancing your car loan.
Second, do not think about refinancing if the old and new loans have equal interest rates or if the new
one is greater than that of the current one. If you do this, then you are running into a big loss. Since
there is no savings whatsoever and therefore no reason to refinance the existing loan.
Things to consider before refinancing your Car Loan.
Even after knowing why you should refinance your car loan, it is of greater priority to know the factors
you should still put into consideration before refinancing your car loan. Take a look at them.
1. Time Left to complete your existing loan.
Before going ahead to take a new loan, find out how much time is remaining to complete the payment
for the first one. If it is less than the duration of the new loan, then don't refinance.
Refinancing is an option here only when the tenure of the new loan is shorter than or equal to that of
the current or existing loan.
2. Your Credit score
If you already have a greater credit score, than when you took your car loan, you can proceed to take a
This will help because your credit score will attract loans with better terms and in the pocket help your
3. Your Monthly Income.
Put your salary or income into utmost consideration. Is there really a need for refinancing If you have a
greater monthly Income? Of course there is not.
Refinancing is only necessary when you monthly income is now lower than before and you therefore
cannot continue with your current loan.
4. Prepayment Penalties.
I mentioned this earlier. Check if your current lender includes prepayment penalties in the loan
agreement. If positive, all is not bad.
Now check again, is the prepayment penalty up to the amount you will save on refinancing? If no, then
you are good to go. But make sure there is a substantial or significant difference between the penalty
for paying early and amount saved for refinancing. To clarify, the amount saved for refinancing must be
greater than the prepayment penalty.
Now let us see how the whole works. How to use the Loan Refinance Calculator and how to apply for a
car loan refinance.
How to apply for a Car Loan Refinance.
Applying for a car loan refinance is not that hard. In fact, it is very simple and straightforward. Follow
this procedure :
Step 1: Review your current loan. Ask yourself these questions.
1. How much is left to pay on the current loan?
2. How much time is left to finish paying the loan?
3. Does my current loan lender subject me to any prepayment penalty?
Step 2: Find the following parameters
Your current loan balance
Your monthly payment
Your current interest rate
Your refinance loan amount
Your refinance repayment duration
Your refinance loan interest rate
Step 3: Input those parameters in the required fields of the Car Loan Refinance calculator and compare
the two loans. If you are saving a significant amount of money, you can go ahead to the next stage.
Step 4: Proceed to your car loan refinance lender, and submit all required information. If your loan
application is approved,then that is all.
Car Loan Refinance Calculator
Like I promised earlier, this is the calculator that will cumulate all the necessary data and tell you how
much you will save if you decide to refinance your car loan today.