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Posted in Auto Loans
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Gerica13

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Refinancing a car when you don't have to.
I can easily afford my payments, but have a high interest rate on my current car loan. I didn't even have a credit history when I bought it! But, now I have a decent score and am getting low interest rate offers to refinance. I don't have to, but "they said" that it would save me around $2000 dollars total than my current car loan. So I guess my question is, What happens to the rest of the money I owe my bank? Do I still pay that or when I switch banks, does the interest come off when the new bank pays off the loan? Confusion here! haha

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When you refinance your new company pays off your existing loan at the amount of principal remaining on the loan. Your new loan will be for that principal amount plus any refinancing fees associated with originating the loan (watch out for those fees!)

When you refinance you may be able to shorten the term of the loan so that the monthly payments are the same or slightly more than before but the car will be paid off much sooner. Resist the temptation to refinance and lengthen the term or else you may end up with a car with a loan that far exceeds the value, and may completely wear out before it is paid off.

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