Is refinancing always the best idea for car loans?

I'm having trouble paying off my car loan each month, but my friend told me that refinancing the loan is an option. I'm always a skeptic. Are there any downsides to refinancing a car loan?

Answer
If you can’t afford your car loan, refinancing is often a smart idea. However, when you extend the loan to lower your monthly payments, you may risk:
  • Paying more interest over the life of the loan
  • Potentially paying a higher interest rate compared to what you have now
  • Being upside down on the car loan
You should also be wary of refinancing if:
  • You only have a year or less left on the loan
  • You can’t find a better interest rate than the one you have now
  • Your credit score has dropped
If you’re looking for ways to free up some cash to pay your car loan, take a look at your car insurance policy. You may be able to save money by comparing quotes from over 50 car insurance companies using the Jerry app. The average Jerry user saves $879 per year on car insurance.
Eric Schad
Answered on Nov 17, 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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