If you took a second-hand car loan a couple of years back, the chances are that this loan is available at a more affordable rate today. Well, if not at your lender, then at some other lending institution! So, can you not take advantage of a lower ROI to bring down your EMI and close your loan quickly?
Of course, you can! All you need to do is switch to a lender willing to provide you with a lower interest rate on your ongoing used car loan. This is called refinancing.
Besides, refinancing in 2022 comes with various benefits, including a lower interest rate.
Why refinance your used-vehicle loan in 2022?
If you’re still contemplating whether to refinance your used car loan, consider the following advantages:
1. Cuts down your interest rate
You can reduce your used-car loan interest rate substantially by refinancing your loan. Even if your lender decides to reduce your interest rate by only 0.5% or 1%, it can still significantly affect your monthly installments.
2. Aids in repaying or availing other loans
Maybe you will soon need another loan. When you file your application for the same, your lender will run a credit check and seek out information about your current EMIs. If they don’t find any or come across a low-cost one, your loan approval chances will shoot up.
Alternatively, if you already have a home loan, paying EMI will become easier if you refinance your used-vehicle loan. Why? EMI savings will boost your disposable income, redirecting towards housing finance.
3. Improves credit score
A higher EMI on a pre-owned car loan can increase the chances of default. And, if you indeed default on your loan, your credit score will take a hit. This will impact your future borrowing capability. However, through refinancing, you can bring down your monthly installments, which means your default chances reduce.
Not to mention, if you continue to repay your EMIs on time, your credit score will also improve favorably. You can use a used-car loan EMI calculator to get an idea of your potential EMIs and plan accordingly.
4. Helps in modifying loan tenure
Through refinancing, you can readjust your loan’s tenure to your liking. Doing this will reduce your monthly payments, which is helpful if you’re finding it hard to manage your EMIs. Alternatively, if you have surplus funds and want to use them to pay your loan quickly, you can reduce your tenure by switching to another lender.
The bottom line
Along with making changes to your loan terms, like reducing interest rate and tenure, you can also add a co-signer or remove one through refinancing. So, if you’re considering refinancing your loan, start by choosing a lender offering relaxed used-car loan eligibility criteria and affordable interest rates.
Also, to make things more convenient, find a lender offering an online application process for speedy processing.