What are the disadvantages of refinancing an auto loan?
· An extended loan payment term could get in the way of buying a new car in the future. · Some extended loan payments only cover the interest which means your monthly payments will not be contributing much to the principal amount. This could lead to a large balloon payment at the end of the loan term. These are fairly rare but they do still occur. · Borrowers with bad credit may end up refinancing an auto loan for a longer loan term but that still has a high interest rate and high monthly payments. This could may not be worth it as it may not save you much money at all. · Beware of ‘precomputed’ loans from dealerships as in many cases a lender could assign most of the payments you have already made to interest meaning that you would still need to payoff a large sum on the principal amount.
