A car is often the second largest loan the average Canadian has; the first being a house loan. Refinancing your car loan can save you thousands of dollars if done right according to our source, macombdaily.com. We will source the article below so you can read their entire article here for your convenience. Before we provide you with tips about your car, you should attempt to not have a car loan. Often Canadians buy cars with making a budget which can lead to you being in car debt for four to seven years. Loan Away advise spending a maximum of 15% of your net income on transportation. This includes car insurance, car payments, gas, and maintenance like weather tires. If you are spending more than 15% you should refinance your car loan or get a car that is within your budget. With all that being said, let’s get into macombdaily.com guide to refinancing your car loan.
3 reasons to consider refinancing your car loan
Most people know they can refinance their mortgage, but less than half are aware that they can also refinance their auto loan, according to a study by Harris Poll for Ally Financial. It’s a simple task that could reduce your car payments by about $1,300 a year.
The following considerations can help you determine whether refinancing your auto loan is the right step for you.
• Interest rates: Can you reduce your monthly costs by lowering your rate? Compare your current interest rate to those advertised. Keep in mind that there are several aspects of your financial history that may have impacted your interest rate for a loan, including credit score and credit history. If your credit score has significantly increased since you financed your vehicle, it may be time to refinance to a lower interest rate.
• Tight monthly budgets: If you need to make some room in your budget due to changing life circumstances or simply have a desire to sock more money away into savings, refinancing your auto loan is a move that may have a substantial impact on your finances. For example, those who have refinanced their vehicles through Clearlane, Ally’s online auto financing platform, have reduced their monthly payments by an average of $112.
• Reducing the term: Another reason many choose to refinance is to reduce the number of payments they will have to make, with the goal of reducing the total amount of interest paid over the course of the loan. This may appeal to you if you can now afford a higher monthly payment than when you purchased your vehicle, thanks to a raise or new stream of income.
If you choose to refinance, be sure to review your loan agreement and terms to make sure you understand your current loan. You should also be aware of any costs that could be incurred by refinancing or changing the terms of your loan.
Did you find the article informational? Employees at Loan Away sure did. Three employees are keen to refinance their vehicle to better suit their budgets. Some are going to have fewer payments and pay off the loan faster, while others are extending so have more disposable income. This decision is based on your current financial situation. If you have an extra $100 each pay, you should consider using that money to pay off your debt instead of saving it in a saving account. Saving accounts often have very low interest while car loans can be more expensive. Before anyone starts saving thousands of dollars, it is recommended to pay off your debts first. Saving and investing should always come last. Here are the steps you should follow.
- Paying off any high-interest debt ( Car loan, credit cards, etc)
- Creating an emergency fund of 3-6 months salary
- Pay off low-interest debt ( Student loans, mortgage, etc)
- Investing/saving
Very simple to follow right? If you are unsure how to invest, there are several investing great books available for your needs. If you enjoyed this post, share it to help the Canadian economy become more aware and educated on their car loans.
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