Car finance is meant to help you drive into the sunset – but if your repayments are holding you back, it might be time to consider refinancing your car loan. It can be a smart move to decrease your monthly obligations, reduce stress and regain control of your finances.

Here’s a quick guide on how refinancing works and how it can help you balance your finances with your long term goals.

What Is Car Loan Refinancing?

In simple terms, refinancing is replacing your existing car loan with a new one. You can do it with your current lender or switch to a new one with different terms.

The idea is to find a better deal, one that lets you structure your payments in a way that makes more sense with your circumstances. That could mean a lower interest rate, a longer loan term, more flexible repayments or something else.

1. A Lower Interest Rate = Lower Repayments

Finding a new, low interest rate for their car loan is the most common reason people change their finance.

If rates have dropped since you first took out your loan or your credit profile has improved, you’ll likely be eligible for a better deal. And trust us, you’ll want to pursue it – even a small drop in rates can lead to big savings on your monthly repayment!

Here’s an example:

Let’s say you have a 10% on $30,000 loan with 3 years left to repay. If that rate drops to 7%, your monthly repayments could decrease by $40-50, depending on other conditions. And don’t forget, that also means less interest paid over the life of the loan.

2. Extending Your Loan Term to Reduce Monthly Pressure

New finance doesn’t always mean chasing a low interest rate for your car loan. If your income has changed or you’ve taken on new financial responsibilities, cash flow might be the priority.

When you extend your loan term, your repayments are spread out over a longer period and your monthly costs are reduced. But remember, this strategy does mean you’re paying more total interest, so it should be approached as a short term solution.

3. Getting Out of an Expensive or Unfavourable Loan

Your loan might have come with high rates and strict terms, especially if it was your first application for car financing. Unfavourable terms could also be found in:

• Dealer-arranged finance

• Low doc car loans

• Balloon payment loans

Whilst these conditions might have suited you at the time, they’re not always the most effective in the long run. Refinancing is a chance to shift to a more straightforward structure that:

• Eliminates fees or account charges

• Locks in a fixed rate (for peace of mind)

• Avoids balloon repayments

• Allows more flexible repayment options

4. Switching to a More Suitable Loan Structure

Just like the terms, the structure of your current loan may not suit your lifestyle or business anymore. Refinancing could offer:

• Business owners the chance to switch to a commercial loan with GST perks

• Private borrowers a way out of a balloon loan and into a standard repayment plan

Finding the right structure for your car loan is just as important as a low interest rate. Adjusting your finance is a second attempt and finding that set up to avoid overpaying.

5. It Could Help Your Budget Elsewhere

Lowering your repayments doesn’t just affect that one line in your checkbook. Freeing up cash flow can also help you:

• Save more

• Pay down other debts

• Cover rising household or business expenses

• Have breathing room for emergencies

Refinancing won’t force you to sacrifice your vehicle, but it could give you an extra layer of security.

What to Watch Before You Adjust Your Car Financing

Refinancing isn’t always the right move. Get in touch with our crew and they’ll guide you through some of the important details:

• Any break fees or exit costs on your current loan

• Any establishment fees on the new loan

• The true total cost of refinancing (not just the new repayment amount)

Before you speak with us, get a head start by checking your credit score and the current balance on your loan.

Enquire Today and See How Refinancing Could Change Your Budget For the Better

At Loans Unlimited, we make navigating refinancing easy. Whether you’re looking to improve flexibility, avoid a balloon payment or find a low interest rate on a new car loan, our crew can assist. We’ll compare a wide range of lenders to find a structure that suits your goals.

To see if refinancing can work for you, contact the Loans Unlimited crew today.