If you’re struggling financially due to an expensive monthly car payment, auto refinance may be a great option for you. Refinancing your car loan can provide significant savings over the lifetime of your loan, infusing your monthly budget with additional cash that can be used to pay down other debts, make repairs on your home, build your savings account, take a much-needed vacation, or make an expensive purchase you’ve been struggling to afford.
But how much money can you really save?
On average, people save $143 per month when they refinance a car loan with iLending. Over the lifetime of the loan, this could equate to thousands of dollars!
When you refinance a car loan, you’re taking out an entirely new loan to pay off your existing one. The new loan then replaces your existing loan, and you’ll begin making payments on it based on the new terms established by this loan.
This allows you to save money in several ways:
The ideal scenario is to lower your interest rate, which will allow you to unlock significant savings over the lifetime of your new loan, as we illustrated in the examples above.
Let’s look at a real life example to illustrate the savings you can potentially achieve when you refinance with iLending. At iLending, we’re able to help our clients unlock significant savings because we have an extensive network of over 50 nationwide lenders. With our exclusive You First Approach™, we handle the entire process for you, making refinancing your car loan easy and hassle free. Since our team can compare loan options from such a large number of lenders, we’re able to identify the best possible loan terms that align with your refinancing goals.
Even with interest rates rising significantly over the last year and a half, our loan consultants have been able to help our clients achieve significantly lower rates through refinancing. In the two most recent months, we’ve been able to secure an average interest rate decrease of 5.38% (January 2023) and 4.94% (February 2023). Let’s use some hard numbers to demonstrate the savings possible when you’re able to lower your interest rate this significantly.
When you take the average of these two most recent monthly interest rate reductions we’ve achieved for our clients, it comes out to an average of 5.16% across both months. For the purposes of our real life example, we’ll examine the savings associated with a 5% interest rate reduction, which is a little lower than this two-month average we’ve achieved for the start of 2023.
Most car loans use an amortizing interest schedule. This means you’re paying a larger percentage of your monthly payment to interest at the start of the loan term. As you move further into the loan term, this switches a larger percentage of your monthly payment will go towards the principal balance, with less being applied to interest.
To calculate interest on an amortized loan:
Now let’s look at our example, using a standard amortized loan. If you initially financed $30,000 of your new car at a 12% interest rate for a five-year term, your monthly payments would be $667.33 and the total interest you’d pay over the life of the loan is $10,040.01.
If you refinance this loan after one year, you’d have paid $8,007.96 and your remaining loan balance would be $25,341.29. With the 5% average interest reduction achieved by iLending, your new interest rate would be 7%. If you kept the same loan term, you’d have a four-year loan term on your new loan. In this scenario, your monthly payment would be $606.83 and the total interest you’d pay over the life of the loan is $3,786.49.
Now let’s unpack your total savings in greater detail:
Over the four years of your refinanced auto loan, you’d save $2,874.23. This is a significant amount of money! Think about what you could do with an additional $2,874.23!
You can use our auto refinance calculator to get a better understanding of what you can save when you refinance your car loan.
Apply now to get the car loan refinance process started.