There is no limit to how many times you can refinance your car. However, you’ll have to find a lender that will give you the money for a new loan, and they’ll have their own rules regarding how they will deal with your refinance. If you’ve already refinanced multiple times, a lender may not make a loan offer.
If you’re considering a loan refinance, it’s important to note that it can be very beneficial to you, as it can help you lower your monthly payments and save you money in interest.
Basics of Car Loan Refinancing
Many people don’t fully grasp how to refinance a car. According to Lantern by SoFi, “When you refinance, you’re essentially securing a new loan to pay down the balance of an original car loan.” Refinancing a loan is similar to taking out a new loan. The new loan should offer lower interest rates and better terms to get the best possible terms.
Although you might be able to lower the interest rate on your loan, keep in mind that the original balance of the loan will not change. To secure the new loan, you’ll need to use the same collateral that you have used for the previous loan.
Reasons to Refinance Your Vehicle
If you’re in a sound and secure financial position and have a financial setback, you might be considering a loan refinance. Your credit score plays a crucial part in the decision-making process when choosing a loan. It allows lenders to determine what terms and interest rates they’ll be willing to offer you. If you’ve paid off debt and improved your credit score, you might be able to get a lower interest rate. This can help you lower the monthly payments and make them easier to manage.
Why You Should Not Refinance Your Car
Although it’s possible to refinance a car loan several times, there are some potential issues that you should be aware of. One of these is the older car that you have. Having a longer-than-necessary car loan can increase the risk that you’ll end up with a financial problem.
1. Your Loan Could End Up Upside-Down
If you’re considering a loan with a longer-term, this could increase the amount of money you’ll be paying over the life of the loan. Another issue with this type of loan is that you could end up owing more on your car than it’s worth. Even if the car is sold, you might still be required to pay the lender’s money if the buyer can’t take over the loan.
2. There May Be Prepayment Penalties
Before you start the process of repurchasing, make sure that there are no penalties in the new contract. You’re essentially taking on one loan and paying off the other when you’re refinancing. However, if you pay off the first loan early, you might end up owing more on the second one.
Although it’s possible to refinance a car loan multiple times, some factors can limit the number of times you can do it. Research whether refinancing makes sense for you.