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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?

avatar
Eric Schad · Updated on
Reviewed by Shannon Martin, Licensed Insurance Agent.
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.
MORE:
Can another party insure your financed car?
Car LoansRefinancingAuto Loan Payments
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