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Reasons to Choose Car Refinance

Car refinance basically means that the outstanding amount on a current vehicle loan is financed afresh with a new finance loan that is structured differently. There are a few reasons why people choose car refinance and these include the following:

2019-05-21

5 Reasons Why People Choose Car Refinance 

It is common practice for people to purchase vehicles via financing. Because cars are expensive, most people cannot buy them cash. Car financing provides the buyer with the option to borrow money from a financial-services provider and then pay it off in instalments over several years. A cash deposit may be required.

Car refinance basically means that the outstanding amount on a current vehicle loan is financed afresh with a new finance loan that is structured differently. There are a few reasons why people choose car refinance and these include the following:

1. Saving money: Sometimes, the financial situation of the person may have changed and they are no longer able to muster the repayments of the current loan. There are several ways in which car refinancing can lower costs. The outstanding amount can be refinanced at a lower interest rate, or it could be extended over a longer period, both of which will reduce the size of the monthly instalments.

2. Removing co-owners or co-signatories from the loan: People might have purchased a vehicle together. Both will be held responsible for the repayment of the loan. Should circumstances change, such as when people get divorced and the vehicle becomes the responsibility of only one person, it may be wise to opt for car refinance to start a fresh loan that relieves the co-owner of their repayments and moves the loan into the other lender’s name. 

3. Paying off a balloon payment: Many dealerships offer loans that keep the monthly instalments to a minimum, but with the provision that a large lump sum (balloon payment) is paid to settle the outstanding amount once the loan comes to an end. Many people turn to car refinance and take out a fresh loan to pay off this balloon payment over an additional period. This means that they do not have to pay a large sum cash to settle the loan, giving them the opportunity to spread the payments over a set repayment period and to continue with monthly payments.

4. Change of circumstance: Sometimes, people purchase vehicles when everything is going well, but then things go wrong. The person may lose their job, their mortgage payments may escalate due to an increase in interest rates, or they may need money to pay for a medical emergency. Car refinance can release the vehicle owner from high payments and lower them significantly, freeing some of their funds to use where they are more urgently needed.

5. Improved credit ratings: Some people may have outstanding debts that effect their credit score. This means that the finance company considers them a higher risk than someone with a perfect credit score, and they will usually be charged higher interest rates. If the lender manages to improve their credit score, they may want to reduce their payments by applying for car refinance. Because their credit score has improved, they may qualify for a lower interest rate and more favourable terms.

If you are curious to find out more about car refinance and how it works, contact our team at BIB Finance for more information.