If you are in need of extra cash and are currently financing a car loan, you can refinance your vehicle to free up some cash. This means that you transfer your car title from one creditor to another. In the process, you free up some cash that you can use for other financial priorities you may have.
4 Benefits When You Refinance Your Vehicle
- Longer paying period
Refinancing your vehicle gives you a chance to extend your current loan for a longer duration. This also lowers your monthly repayments. Such an arrangement makes sense when you are not financially stable, or need to free up some cash to take care of your other financial priorities.
- Money savings
When you refinance your vehicle, you can save money over the long-term in terms of the accrued interest. In South Africa, the interest rates fluctuate. You may refinance your vehicle when the interest rates are low and enjoy extended loan repayment periods at a lower interest. For example, refinancing a five-year, R150 000 loan into a new six-year loan at lower interest rates may lead to a decrease of over R400 in your monthly payments. A reduction of a loan by just one percent may save you several thousands of rands over the life of the loan. The saving you make can be used for other priorities.
Most lenders charge a high interest to clients with bad credit history. If this was your predicament but your credit rating has subsequently improved, you may enjoy a lower interest by refinancing the loan.
- The evil lease
If you are trapped in a particularly evil lease, then you can refinance your vehicle to escape the lease. The refinance loan can be used to buy out the lease and make the payment directly to the lender rather than to the leasing company. The other advantage of this arrangement is that you own the car after completing your payment cycle.
- Cash-out option
If you have built up some equity value while paying for the original loan, you may enjoy the benefit of a cash-out option when you choose to refinance your vehicle. If you choose a cash-out option, the lender determines the worth of your car then compares it with the amount you have paid for your loan. If the car is worth much more than the amount that you owe, the lender could pay off the loan and return the difference to you. The cash-out option is appealing when money is tight, and you urgently need some extra cash.
Contact the consultants at Carfin to get up-to-date information about the specific terms and conditions relevant to your vehicle finance requirements.