How to Refinance a Car Loan (The Right Way)

How to Refinance a Car Loan (The Right Way)

refinancing a car is a really good way
to save money but you’ve got to understand how to do it properly in
order to not get screwed so in this video I’m gonna teach you how to
refinance a car loan and I’m gonna tell you why you’d want to do it now if you
just found this channel I’m Jason with honest finance and I make a lot of
videos on different financial topics that’ll give your life and your finances
more value so feel free to subscribe if you’re interested or at least give this
video a like and now let’s talk about car loan refinancing okay so refinancing
a car is not that complicated to do but I’ve got to break it up into two
different parts which are the why and the how so that all of this stuff makes
sense so let’s start with why you should refinance your car loan well the main
reason why you probably want to refinance your car loan is because you
just want to get a better interest rate than the current loan that you have
already this is especially true if you’ve already got a bad rate on your
loan because as long as you’ve made your payments on time and you have better
credit then you’re probably gonna get a much better rate and that’s gonna save
you a lot of money because let’s just say that you currently owe $20,000 on
your loan at 11 percent Interest and you still have three years left to pay off
the loan well with those numbers you’re gonna be paying about a hundred and
eighty bucks a month in interest which is a total ripoff but if you refinance
that loan to let’s say five percent Interest then you’d only be paying about
$80 a month of interest which is so much better and that’s still on a three-year
term and on top of all of that stuff your monthly payments are also going to
go down and in this case if you really wanted to pay off the car loan faster
than I would just pretend that your payment’s were the same as your old ones
that way you’re paying extra on the car loan and you can pay it off faster now
the other reason why you might want to refinance your car loan is because you
just can’t afford the payments but pay attention here because I want you to
understand what you’re doing if this is the route you’re gonna take simply by
refinancing your car loan and extending its length your payment’s are gonna go
down even if the interest rate goes up just a little bit and this is all
because of the length of the loan because if you’ve got a car loan that
has three years on it and then you turn it into a six year then you’re gonna
save a lot of money in your monthly payments even if that interest rate did
go up just a little bit but I would HIGHLY advise that you don’t take this
route and you just try to make your monthly payments or just sell your car
because you probably afford it and the main reason I say this
is because cars are depreciating assets so the longer you have a loan with a car
the more likely you are that you’re gonna end up upside down in the loan and
being upside down in your car loan means that you owe more than it’s worth
which is not a good thing and you’ve got to understand here that when your car
loan is way too long you’re gonna be paying too much in interest and your
car’s gonna depreciate a lot faster than you’re actually paying it off don’t be
deceived by a lower monthly payment because it’s all a lie if all you’re
doing is stretching out the loan just try to refinance your car loan to a
length that’s either the same or shorter than the one that you already have
because that’s going to give you the best value you’re gonna end up paying
off the car a lot faster you’re gonna pay a ton less in interest and the risk
of going upside down in your car is going to go down significantly because
of the shorter loan now I did make a video on how car loan interest works so
if you need some help in that area then I’ll just put it right here and you can
watch that video too now I also want to mention cash out refinancing which means
that you actually cash out on some of the equity from your car so let’s just
pretend that you owe $10,000 on your car but it’s actually worth $15,000 well you
could get a cash out refinance for about $12,000 that way you get to keep $2,000
for yourself and then you just use the other ten for the financing that was
already required you can spend the cash out money however you’d like but I still
want to warn you that cars are depreciating assets and I want you to
keep that loan as low as you can you’ve still got to pay interest on the
money that you’re cashing out so just keep that in mind as well I mean in
theory you could use the cash out money to pay off loans that have higher
interest rates but I mean seriously who’s gonna do that just be smart about
the reasons why you want to refinance your car loan and do the math before you
sign any paperwork so if it were me personally the only reason why I’d
refinance a car loan is just to save money on interest and that’s about it
now if you’ve made it this far into the video could you please just comment down
below and say I’m still here so that I know how many people are still watching
this video thanks so now that you’ve decided that you want to refinance your
car loan I’m gonna teach you how to do it so pay attention here now if you want
to get a better rate on your car loan you’re gonna have to have good credit or
you’re gonna have to find a cosigner that has good credit there’s no way
around this but as long as you’ve made your payments on time then your credit
should have gone up naturally you can get loans with bad credit but trust me
they’re just a total ripoff and you’re better off just establishing good credit
before you start to borrow money now this is obvious but if you want to get
the best rates when you’re borrowing money then you have to have good credit
like I’ve said over and over again and now let’s move on to finding a lender
which is really easy to do if it were me personally I just checked my local
credit unions because they tend to have the best rates or I’d check online which
I’ll talk about in a minute please just make sure to pay close attention to the
lenders contracts because I don’t want you paying any prepayment penalties and
I don’t want you to have an origination fee either trust me you don’t want to
have to pay a fee just for paying off your loan early and origination fees can
range anywhere from 1 to 6 percent of the total of the loans value so let’s
say that you borrow $10,000 with an origination fee of 5% well that’s an
instant 500 bucks that you’re just wasting because of that fee and please
if you do refinance your car and it happens to be around the same time that
your current payment is due just make sure that everything is paid off
correctly because I don’t want you to accidentally have a late payment just
pay attention to that kind of stuff because accidents do happen especially
when the timing is not perfect now as far as online lenders go I would highly
recommend checking out light stream loans because they’ve got the best rates
that I’ve found and they’ll beat any competitors rate as well light stream
doesn’t charge any dirty origination fees and they don’t have prepayment
penalties on their loans as well I currently have a personal loan with them
and they’ve been really easy to work with and I did get the money the same
day that I applied which was freakin sweet
now I’m not sponsored by a light stream I just want you guys to know that
there’s a ton of crap loans out there and these guys really do a good job with
being honest with their customers now I’ve got an affiliate link down in the
description below if you want to check them out or just go with whomever you’d
prefer just be responsible with how you borrow money and I promise you you’re
gonna end up in a much better situation but at least now you know how to
refinance a car the right way now once again I’m Jason with honest finance and
I make a lot of videos on different topics that’ll give your life and your
finances more value so feel free to subscribe if you want to or you can
check out some of my other car related videos over here that’s all

About the Author: Michael Flood


  1. I got 5 years left with 8 thousand interest because of my 19% interest, should I refinance my car now that my credit is around 680 to 700?
    Still here

  2. I'm fucked I dont know what to do I got a 9% for 72 months paying 350 a month how much am i paying in interest ? I owe 19 on car

  3. Im still here, I was a first time buyer when I got my car, my monthly payments are 422$ my interest rate always goes around 250 to 280$ every payment I been with the car for 7 months making payments on time but it’s getting heavy for me to afford should I refinance the car ? My credit score it’s about 642 at the moment keeps increasing or should I wait more time ? Help please

  4. I’m still here. I’m 20 years old I have 10% interest on a 15k car I’ve had the loan for about 3 months and my credit score is around 710. When would I be able to refinance?

  5. I’m paying paying for a $19,000 car with a two year bumper to bumper warranty. It’s my first care loan by myself and my credit is around 650. I got 16% interest and even the dealer said it was high. He told me after 8 payments I should be able to re fiancé after I establish better credit. He also told me to go with a credit union. My payments are $430 a pony currently for 7 years. But I’m hoping to drop drop it down to below $300 monthly

  6. Amazing Video, man! Really interested to learn more about the "Cash Out Refinancing" Option. Can you please explain how to go about doing that? Would you just put the value of the car where it asks for the "Loan Amount" on the application? Looking forward to your reply!

  7. Great advice, thanks Jason. I applied with Lightstream and hopefully I get approved and you get that commission! I appreciate your considered time in answering the exact question I had AND a solid recommendation.

  8. Bought a car 5 months ago. I don’t regret the payment nor regret the car. I thank god I have a good job but as a 20 year old they gave me an interest of 13.9 on a 35k car. My credit score says 720-740. Do you think it’s possible for me to drop between 3-6 percent? I just want to save money on the interest but send the same amount as I’m currently paying.

  9. I'm still here. I want to refinance my car for a suv and my interest rate for my car is low already, Is it possible to keep my interest rates low on a SUV when I refinance?

  10. Refinanced my car after watching this video! I was at 7% for 84 months (I needed my payments low bc I just started a new job and wasn’t making a lot of money) but I got a promotion within 6month and was stuck with that 7% interest rate! So I watched this video and called my local credit union and now I’m at 3.7% for 60 months! So helpful!

  11. I'm still here.
    I have a 6-year car loan with an int. of 7.5, I'm currently 3 years in with a 100% payment history which has improved my credit score significantly, I have 732. I also have another small loan and one credit card which are in good standing and I'll pay off those in 5 months, I would like to refinance my car to save for school tuition and also pay it off faster. Do you recommend refinancing already? or should I wait 5 months till I finish paying off my other loans?

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