Nearly everyone knows the benefits of refinancing a mortgage to save on interest payments. However, did you know you can do the same thing with your high interest automobile, boat, motorcycle, and RV loans as well?
I’m not a big fan of financing any kind of vehicle, but if you already have a loan for one or more of your “toys” you can save hundreds (or thousands) of dollars over the term of the loan. Especially with the historically low interest rates still being offered by banks and credit unions.
A friend of mine shared his success of how he recently refinanced his truck loan from 8.5% to 3.9% saving him over $600 per year in interest payments.
In his particular case, he had 46 months remaining on his original loan. He refinanced the loan with a credit union that was running a promotion of 3.9% to attract new members. He refinanced the loan for 40 months and his monthly payment actually went down.
He hopes to pay the loan off as quickly as possible, but even if he only paid the minimum monthly payments he would still save over $1,700.
How Did He Do It?
Shop Around: Check your local newspapers for promotional ads being run by local banks and credit unions. Credit unions are especially generous in offering low interest rates to attract new members (as my buddy found out).
Speak to Your Current Bank: In most cases, your current bank will be less likely to negotiate a lower rate on your automobile loan. After all, unless you are in serious financial trouble there really isn’t anything in it for them.
Accelerate Payments on Your Loan: I thought about refinancing my automobile loan through USAA when my family I committed to stop borrowing and pay off over $90,000 of consumer debt. Once I figured out how quickly we could pay off our loan utilizing the debt snowball method of debt repayment, we decided the difference in interest savings wasn’t worth the hassle.
Improve Your Credit Scores: For many individuals, their high interest rates were based off of their low credit rating (FICO Scores). If you find yourself being continually denied a lower interest rate due to your poor credit score, follow my tips on how to improve your credit report and boost your credit scores.
Too Much Debt? Download our free Trees Full of Money Debt Snowball Calculator and see how quickly you can pay off your debt.