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Car Refinancing

Car refinance usually becomes necessary to refinance an outstanding amount on a car that has already aged a few years and lost a lot of value. 

2019-02-01


What Car Refinance Is and When You Need It

We all need some form of transport to get us around, and because vehicles are expensive, we usually have to borrow money from someone or obtain car finance to buy a vehicle. Not many people understand the concept of car refinance, and it is important for consumers to understand the differences between car finance and car refinance.

What Car Refinance Means

Some people obtain vehicle financing for a brand-new vehicle with a balloon payment, which are common nowadays because it allows the owner of a new vehicle to reduce their instalments for a few years, and then to pay a lump sum to secure complete ownership of the vehicle. Sometimes, these balloon payments can be very large – more than 30% of the financed amount’s value, and as a result, the vehicle owner has to take out car refinance to finance the balloon payment on the vehicle – or give the vehicle back to the bank and start the cycle afresh. 

When You Need Car Refinance

Balloon payments can be useful – both to the owner of the vehicle and to the seller. Balloon payments means that a vehicle can be financed at much lower repayment instalments initially, and even for up to five years. The problem comes when the initial vehicle instalment period comes to an end and the outstanding balloon payment becomes due in order to maintain ownership of the vehicle. The owner therefore either has the option to settle the balloon payment instantly with cash, or to seek car refinance options to ensure that the balloon payment can be financed over an additional repayment period.

Other options include vehicle owners using the vehicle as collateral against a loan, such as education fees, building materials, shop accounts, or other debts. Car refinance usually becomes necessary to refinance such an outstanding amount on a car that has already aged a few years and lost a lot of value. It also requires more money to keep such a car maintained and safe on the road. This is why car refinance is usually only done when someone is adamant to own the vehicle.

There are benefits to taking out a car refinance loan. It can reduce vehicle instalments – where finance instalments have become unaffordable, the amount still outstanding on the vehicle can be refinanced over a number of additional years, significantly reducing the instalment. Some companies that offer car refinance will even extend the loan, which means that the longer the vehicle is owned, the cheaper the instalments become. Another advantage of car refinance is that it allows the vehicle owner access to short-term loans for emergencies and other payments that need to be made when cash is not available.

Where to Go

If you are keen to learn more about car finance and refinance plans and how they work, contact our team at BIB Finance! We are always happy to discuss the best financing plans to suit your budget and we will help you secure the best loan for your situation and needs.