Will 2022 be the right time to refinance a car?

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Refinancing a car loan can be a good idea when interest rates have dropped, your credit has improved significantly since you took out your loan, or when you also need to save some money each month. . With interest rates expected to rise later in 2022, now could be a good time to take advantage of auto loan refinancing.

Why refinance in 2022? Right now, with prices rising and interest rates set to rise later in the year, a 2022 refinance might be a better bet earlier in the year. The benchmark interest rate is expected to rise nearly a full point this year, and you might want to take advantage of refinancing your car before that happens.

Will refinancing help me save money? Refinancing is usually done to save money on your monthly car loan payment. There are two ways to save money when you refinance your car loan: by lowering your interest rate or by extending the term of your loan. Only a lower interest rate saves you money in the long run. If you extend the term of your loan without lowering your rates first, you might pay less each month, but end up owing more in interest charges.

The latest interest rates as reported by Experian in the third quarter of 2021 range between 3.68% and 19.85% on average for used vehicles, depending on your credit score. The better your credit score, the lower the interest rate you may qualify for.

If you have chosen to refinance, our proprietary data indicates possible refinance rates as low as 2.74% based on your credit score and other qualifying factors. This could represent significant savings over the life of your loan.

For example, if you originally took out a loan of $15,000 with an interest rate of 9% for 60 months, you would pay $18,683 over the life of the loan, including $3,683 in interest charges. Let’s say you make your monthly payment — $311.38 — for two years. That means you’ve already paid $7,473.12, still owe just under $10,000, and have 36 months left on your loan.

If you refinance a 36 month loan with an interest rate of 3%, your monthly payments drop to $290.81 and you end up saving almost $800 over the life of your loan.

Our catch. As you can see, refinancing can save you money, but with high prices and rising rates, you may not save as much as you would like. It all depends on your situation and what you are entitled to. If refinancing is the course of action for you, we want to help you at Auto Credit Express. You can start the process of finding a refinance lender here by completing our fast and free auto loan refinance application form.


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