Replacing your existing car loan with a new car loan from a different lender is known as car loan refinancing. Refinancing of this credit option will help you get repayment terms modified, even if a loan is already in progress. In refinancing, you get a loan with new benefits, features, and conditions.
If you find that your current car loan conditions are not favourable, and come across a bank or lending institution that is as per your needs, you should not look back and go in for the refinance. When you refinance the loan, you stand a chance to receive better terms, especially concerning the car loan interest rate, tenure of repayment, lower EMI’s processing fees, etc.
When to go for refinancing?
If you find the tenure of the car loan is too long for you or if the rate of interest or processing fee is not as per your desire, you can refinance the loan with a new car loan provider. Doing this can also help improve your credit score as you will now be paying the EMI on time as you have found the desired car loan provider.
So, all in all, refinancing a car is nothing but changing your car loan provider as you are not comfortable with one or all of the factors (rate of interest, processing fee, change of tenure of the loan, EMI etc. Refinancing means you end up with a new contract so if you were looking to change the co-financer of your old car loan, now is a good time to do so.
When is refinancing possible?
Refinancing is possible immediately after buying your car even before you make your first monthly payment. However, when you go for refinancing, make sure that you are opting for a better deal. During refinancing, a car’s year or mileage may be taken into consideration depending on the bank or financial institution. For instance, Axis bank car loan policy provide this option to the borrowers.
Things to consider when refinancing:-
While the above information explains the benefits of refinancing, note that refinancing can also have various impacts on a person’s finances. Either you change the tenure of your loan or your interest rate or both during refinancing. Too important to note is that you continue with your scheduled car loan payment until the refinancing is complete or you may end up defaulting.
Refinancing is done not just when the borrower is not able to pay the current EMI. It is also done when the borrower is in a situation where he can pay back the loan amount faster than he previously realised. Don’t be stuck with a loan payment that is not favourable to you or if your financial situation has changed. Do not hesitate to go in for refinancing when it helps you.
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