Auto Loan Refinance and Upside-Down Loans

As inflation continues to eat into our expendable cash, it also has a negative effect on the value of your auto. With rising inflation in our country, it makes handling our daily expenses more challenging. It also seems that upside-down loans have become a phenomenon of late. As much as 23% of auto owners find themselves with auto loans that cost more to stay current than their car is worth. How does this happen and what can you do about it?

It is very common for the dealership to stretch out their loan terms so that they can make monthly payments. What happens is that when you do stretch out the loan terms, you end up paying off the auto loan over five or six years.

They do this because they are trying to reduce the monthly car payment to a level that you can afford. Did get understand that? A level that you can afford so that you move forward with financing through the dealership. That might be a red flag that a bigger down payment is needed or that a less expensive car should be considered. Well, it happens, and there are still things that you can do with a little planning.

This might sound attractive at the time, and when the salesman/finance administrator is going over the figures in his office, they can sound even more attractive. However, give it just a couple of years, and you can find yourself paying a lot of money for a car that just keeps depreciating.

This is called LTV (loan to value), and with autos depreciating at an accelerated rate in today’s economic crunch, it catches many people off guard when they find out they owe more than the car is worth. The more miles you put on the car, the faster it depreciates.

When cars depreciate (and they begin to do so as soon as you drive them away from the dealership) their value does not go back up. That is a fact.

Your auto is getting older day by day, but your auto loan is still active and due every month. The terms don’t change, and the figures that you agreed to all those months ago don’t change either. When this happens, your auto loan has turned “upside-down”.

Imagine owing $11,500 on an auto loan for an auto that is worth only $9,650. This happens, and it is happening to many people all over the country.

One thing you can do is knuckle down. If you fancy yourself as a straightforward type of guy or gal who pays their bills on time, this might be exactly what you do. You might check out two guides that can greatly benefit you in your search for better financing. One is called the finance guide, and the other is improving your credit score. Great information as you do your research. You might kid yourself a little. You might say to yourself that there is every chance you will strike a better deal on the next auto. This is all well and good, but that could be two years away or even three. That is two or three additional years of crushing expense on an auto that is becoming less valuable every month. The gap will probably widen over this time.

Another way of dealing with the problem (and this applies to straightforward types of guys too) is to look at your auto finance options. One clear option is to refinance your car. There are many advantages to doing this, and they all benefit you.

What is refinancing? You may not be aware of this option so simply put, auto loan refinancing is transferring the loan you have on your car to another lender, one who can offer you better terms than your current one. It is dependent upon the current interest rates that the Federal Reserve offers and right now, they are on the increase, but depending on when you purchased your car, it could be beneficial. The new lender takes on the loan, and you take on lower monthly payments.

It is not hard to see how refinancing your auto loan can rid you of the upside-down loan problem. The best way to find some lenders who can give you great terms is to go online. This is because the hard work has been done for you by online providers.

There are many providers out there, but a good place to start researching your options is http://www.myautoloan.com. This auto lending platform company is serving a lot of drivers because it can offer you up to four quotes from lenders within minutes.

Don’t let the upside-down loan phenomenon damage the relationship you have with your auto. Refinance your auto loan and go spend the money you save on something else. Good luck and keep learning about auto finance and how you can save money.