By being familiar with the life of an auto loan, you can understand how you might save money by refinancing your auto loan later.
So you bought a new car? Right now your auto loan is probably the last thing on your mind. But understanding the stages of an auto loan can help save you a lot of money down the road. Dealers work with lenders to provide auto loans. The consider the four “C”s when determining your interest rate:
• Character – Your borrowing reputation
• Collateral – Your car’s value
• Credit Score – Your credit bureau rating
• Capacity – Your ability to repay
Lenders and dealers will also include a dealer markup that adds an additional 1 to 2.5 percent to your APR. Once you’ve driven off the lot, it’s time to think about repayment. Did you know the average new car loan term is 67 months? And the average monthly payment is $482? However, there may be a way you can reduce your monthly payment. No matter where you are on repayment, it’s always a good idea to consider refinancing, especially when interest rates drop, your credit score improves or if you didn’t receive the best initial rate. Refinancing your auto loan is easier than most people realize: Just shop around for better rates. Once you’ve chosen, it’s typically a simple process to apply online. Credit Karma refinancers saved an average of nearly $2,000 in interest over the life of the loan. Their average monthly payment before refinancing? $460.68. And after? $365.25, a savings of $95.43. That’s nearly 50 gallons of gas! Congrats! Now make your payments on time and you’ll be in the clear and have a car to call your own.