(Guest Post by Platinum Direct Finance)
Recalibrating car loans is often done by consumers who wish to take advantage of a drop in interest rates, or they may simply want to upgrade their current vehicle. In this article we discuss some of the risks you should keep in mind when you want to refinance your car loan.
Car loan refinancing is often transacted for some or all of the following reasons:
Decrease of the loan repayments (dollars) – Refinancing is about reducing your dollar amount payments per month. Lower interest rates results in fewer dollars needed to be shed per month.
Decrease of the loan repayments (frequency) – Some loan amounts can be paid fortnightly, which in the long run decreases the total dollar amount of the loan being repaid and in turn reduces the frequency needed to service the loan.
Extra repayments – This simply relates to the ability of being able to make extra payments, without penalties being applied.
Extra facilities – Often loans with added features allow for the option of redrawing on any extra payments you have made. However, the interest rates are often higher.
Upgrading to a new vehicle – This is often a dream that turns into fruition after much sole searching and calculator key tapping. This will necessitate in clearing the detritus of the old loan, in order to create a fresh plinth for the new one.
The Risks:
Keep in mind that there are hidden fees that must be taken into consideration before these recalculations take place, that come under the terms of:
Switching fees – Note that these are often termed ‘exit fees’ (from the current loan).
Entry fees – Or commonly known as ‘establishment fees’ (for the new loan).
Bear in mind that other hidden mathematical calculations could take place in the background while you sleep, which can relate to such factors such as compound interest. This simply means interest calculated on top of interest already generated.
Knowing the terminology stands all consumers in good stead of being able to converse with the lender and show that valuable homework has been undertaken. Make sure that the interest rate cut is significant in the refinancing process. If you only save the cost of a cup of coffee per month, then there is virtually no point in refinancing.
Also note that if a product mainly gloats about the interest rate, make sure to read and digested the fine print. Glossing over this important document has seen many consumers curse when they discover the exclusion of the most important comfort factor omitted of the Redraw facility: This simply allows the consumer to redraw on any extra payments that have been made on the loan. One never knows when there will be an unexpected expense arise, such as the need to pay for children’s orthodontia, or the need to take a well-deserved holiday, just to name a few.
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This article is a guest post by Platinum Direct Finance. Platinum Direct Finance provide loans for people in Australia who wish to purchase assets including boats, planes, trucks, forklifts, office equipment and vehicles. Visit Platinum Direct Finance for refinancing your car loan.