The cons of refinancing are few but significant. Sometimes there are penalties or fees for refinancing. Whether these are prepayment penalties or processing and administration expenses, they can reduce or even exceed the savings you would get from refinancing. Prepayment penalties are rare, but they are usually charged on loans to low-credit-score borrowers as a means of keeping them locked into a high interest rate.
Depending on how long you’ve been paying on your original loan, you may owe more on the car than it’s worth. In this case, your new loan amount may not fully pay off your old loan, leaving a balance that you will owe in a lump sum. The newer the loan, the more likely this is, and it will definitely overrun most, if not all, of your anticipated savings from refinancing.
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