Is it a smart move to refinance a used Kia Optima?

"I'm thinking about refinancing my Kia Optima.

With the $200 application fee, closing costs, and only a 1% interest-rate drop (from 5% to 4%) over 24 months (with a $8,000 balance), it doesn't seem worth it.

Is a refinance a great idea?"

Answer
“With the figures you’ve provided, refinancing would actually cost you more money. The 1% drop in interest would end up saving you $85 in interest, but, with the $200 fee, you’d actually lose $115.
In this case, you should pass on the car loan, as your break-even interest rate would be 2.65% (if you had to pay the fee) instead of 4%.
You might also want to shop around to see if you can find a lender that charges a lower application fee.”
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Eric Schad
Answered on Jun 18, 2021
Eric Schad has been a freelance writer for nearly a decade, as well as an SEO specialist and editor for the past five years. Before getting behind the keyboard, he worked in the finance and music industries (the perfect combo). With a wide array of professional and personal experiences, he’s developed a knack for tone and branding across many different verticals. Away from the computer, Schad is a blues guitar shredder, crazed sports fan, and always down for a spontaneous trip anywhere around the globe.
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