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What does refinancing do for a car loan?

I'm having some trouble making my monthly payments on my loan, so I'm thinking about refinancing my car loan. Is that a bad idea? I'm not sure exactly what refinancing will do to my loan.

avatar
Liz Jenson · Updated on
Reviewed by Shannon Martin, Licensed Insurance Agent.
No, it’s not a bad idea to refinance your loan. In fact, it could save you some money over time as well as lower your monthly payments.
Refinancing a car replaces your original loan with a new one, which is usually from a different lender. You’re essentially using a new lender to pay off your old loan, which transfers your remaining loan debt to a new party. Many people will try to find a new loan with either:
  • A lower interest rate
  • A different repayment period
You should note that longer repayment periods will lower your monthly payments, but they could result in you paying more over time with interest. You can also add or remove a co-signer on your loan when you refinance.
If you’re having trouble with your monthly bills, another great place to cut costs is your insurance. The
Jerry
 app makes this process quick and easy. Jerry will collect insurance quotes for you, so you can find the lowest rates for the coverage you need.
MORE:
How to get out of an upside-down car loan
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