Why And How To Refinance Your Car Loan And Save Money

Refinancing a car loan can be a good option if you’re getting better interest rates and other terms than your current loan. It can be a constructive way to pay if you are paying a hefty interest rate on your current loan and finding it challenging to repay.  

The process of refinancing a car loan is smooth and needs just a few documents and specific information on the car, like model, year of manufacturing and more. Whether you want to stick to your current lender or want to apply for a new one depends on several factors. Making a comparison between available options gives you a clear picture and understanding of what to opt for.

What is Car Loan Refinancing?

It refers to substituting your current loan with a new loan in order to decrease the monthly repayment amount and make the loan more manageable. Choosing a new loan from a different bank can give you better interest rates, loan tenure and other factors. You can also opt for another loan from the same bank with better terms.

You can opt for such loans if:

• You have come across a loan with better terms and conditions than your current one, such as:

1. Late payment
2. Application charges
3. Insurance

• You come across a loan with lower interest rates
• You want to lower your monthly payments by increasing the loan tenure
• You want to increase your monthly instalments owing to an increase in income
• You want to leverage your increased credit score to get lower interest rates and more suitable terms

Check : Personal Loan Interest Rate

Why to Apply for Car Loan Refinancing?

Going ahead with this option comes with numerous advantages, such as:

• With lower interest rates, you can enjoy savings and plan your expenses accordingly.
• A loan with a different bank allows you the flexibility of negotiating better terms, improved customer service and interest rates.
• You have the option of removing the co-signer if you’ve co-signed your previous loan.
• The interest you pay will be less if you are choosing a new loan for a shorter tenure as you will be paying a high EMI amount.
• The overall interest payment can also be less if you get a lower interest rate.

Important Factors to Consider

Consider these instances before applying for car refinancing:

• If you have paid a bigger part of your current loan, then you have paid the majority of your interest. You shouldn’t opt for refinancing in such a case.
• If the whole refinancing process, including its related charges, is costing you more than the balance loan amount, do not proceed.
• Even if the new loan allows longer tenure, it may come with a higher interest rate, hence increasing the overall cost.
• Depending on the financial institution, eligibility criteria like the minimum income and credit score requirements can change. 
• If you are planning to refinance, the new financial institution pays the entire amount related to your current lender, and this entails prepayment charges. If prepayment charges are high, this may not be the best move.  
• Compare the benefits you are getting with the additional charges of closing the current loan. 
• Consider if your car’s value has depreciated significantly over time, as financial institutions may not agree to refinance. 

Also Read: Best Way To Finance a Used Car Loan

By opting for car loan refinancing, you can reduce your EMIs and maximise your savings. If you are looking for a personal loan to refinance your car loan, the Fibe Instant Personal Loan can be an excellent choice. You can apply online with minimum documentation on meeting simple eligibility criteria and get access to funds instantly.

What’s more, you can get up to ₹5 lakhs loan without end-use restrictions at affordable interest rates. You can even foreclose it with no added cost and enjoy a comfortable tenure of up to 36 months. Register on our website or download the Fibe Loan App to get a quick personal loan online with stress-free repayment.

FAQs on Car Loan Refinancing

Can I refinance my car loan?

Refinancing a car loan means replacing your current loan with a new loan with an aim to lower the monthly repayment amount. You can refinance your loan to get better terms, depending on factors like your car’s condition and financial institution’s terms.

Does refinancing a car hurt your credit?

Yes, refinancing a car can affect your credit score negatively, but only temporarily. In the long run, it can help enhance your score since repayment becomes easier and you don’t miss out on the EMIs.

How to refinance a car in India?

Compare the interest rates, other fees and charges, tenure and other terms of your current loan with the new loan. If it decreases the total amount you will be paying, refinancing can be an ideal choice.

Is it good or bad to refinance a car loan?

Refinancing your car loan can be an excellent decision when it helps make repayment more affordable. You can opt for it if the terms of the new loan align with your financial needs.