Car Loan Refinancing in Ontario
If you have a car loan you might’ve heard the term “Refinancing” being thrown around. It’s a pretty big word and big words are usually important right? They are. We’ll discuss what refinancing means and if it’s something you should be considering.
What is Car Loan Refinancing?
Car loan refinancing in Ontario is essentially a redo on your current car loan. You go back to the dealership with a new financial situation and then redo the terms of your contract to be something else.
Why would you want to do this? Well there are a few reasons. The most clear is to try and secure a lower interest rate. If you had bad credit when you applied for the original car loan, and you’ve now been able to improve your credit score, you should be able to get a better interest rate on the loan.
you‘ll also be able to extend the duration of the loan, meaning lower monthly payments, which can be useful depending on your situation. Or, alternatively you can decrease the duration for higher monthly payments but the ability to pay off the loan quicker.
How do you Refinance a Car Loan?
It’s not quite as simple as calling up and asking but that is the essence of it. Before you can ask, you’re going to need to secure some documents to refinance a car loan in Brantford. You’ll need all the personal stuff you normally need like your SIN number and your address. You’ll also need proof of income.
You’ll need proof of car Insurance and all the information on the car: Make, model, mileage and age primarily.
After you’ve got your information you can shop around and find the best place for a refinance that gives you the terms you’re looking for.
Should you Refinance your Car Loan?
The real question is: Should you refinance? Is it right for you? And that really depends on your current financial situation.
If you got the loan with bad credit at a predatory rate and are now in a more secure financial position, with good credit then it’s most likely worthwhile to do. If on the other hand you're basically in the same position as you were when you got the loan then you’ll probably just end up with a similar loan.
It can also depend on the age and value of the car. There comes a point where refinancing the loan is kind of silly since you might end up paying more for the car than the cars actually worth.
If you’re looking to refinance in order to pay off the loan early, make sure your current loan doesn’t have a prepayment penalty, a little clause on the loan that means you have to pay a fine if you pay off the loan earlier than the contract specified.
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