Want to get a better deal on your car loan? Consider refinancing.
Did you know you can refinance your car loan to maximise your savings and reap the benefits of a lower interest rate? The guide below will take you through the ins and outs of refinancing and show you some options to compare.
- No monthly account fees
- Extra repayments OK
- Borrow up to $60,000
100% confidential application
IMB Secured Personal Loan
Refinance with a IMB Secured Personal Loan and enjoy a great competitive fixed interest rate with no ongoing fees.
- Interest rate from: 7.39% p.a.
- Comparison rate: 7.74% p.a.
- Interest rate type: Fixed
- Application fee: $250
- Minimum loan amount: $2,000
- Maximum loan amount: $60,000
Car Loans you can refinance with right now
Why should I refinance?
If you're still on the fence about refinancing your car loan, here are a few benefits to consider:
- You can reduce your repayments. Better rates and fees may be available and refinancing can help you unlock these.
- You can make your balloon payment more manageable. If you are currently paying off dealer finance it's likely you'll have a balloon payment to cover when your loan ends. Refinancing can allow you to pay off your balloon payment over an extended period if you aren't able to pay the lump sum.
- You can sign up with a better lender. Not all lenders are created equal. Some offer discounts on other products when you sign up for a car loan, better customer service, easier account management and add-ons that may not have been available with your previous lender.
How does refinancing work?
Refinancing your car loan means simply switching to a different lender that may be able to offer you lower rates, fewer fees or easier repayment options to help you pay off your loan sooner. If done correctly, refinancing your car loan can potentially save your hundreds, if not thousands, of dollars.
You can either refinance yourself or enlist the services of a finance broker, who will work on your behalf to get the best refinancing option. Either way, it’s important to compare the car loan refinancing options out there before making the decision to switch.
What should I look for in a refinancing car loan?
- Your repayments will be less. This is very important to check. Less interest does not always mean lower repayments, so remember to take into account upfront and ongoing fees as well as the loan term you're asking for and use a comparison rate calculator to determine the cheaper option.
- You won't pay more interest over the loan term. Lower repayments may just mean you're paying more interest over the loan term, usually because the term has been extended to lower your interest.
- The loan has the features that you want. If you want to be able to make extra repayments, repay the loan early, a redraw facility or an insurance product bundle, make sure the new lender offers this.
- The lender is legitimate. A number of lenders operate in the car finance space and it's up to you to sign up with a reputable compare. See how transparent the lender is with rates and fees and how easy they are to contact.
How to compare car loans when you want to refinance
If you believe refinancing your car loan could be a good option, there are some features you must compare when selecting what car loan is right for you:
- Interest rate. Ensure you compare the interest rate across all the car loans available to you. The lower the interest rate the better, so try and find a loan that gives you a low interest rate to assist you in saving money.
- Flexibility in repayments. Flexibility in repayments is a huge comparison point. Can you make weekly, fortnightly or monthly repayments? It’s also important to compare if car loans allow you to make additional repayments so you can pay off your car loan quicker. If flexibility is important to you, check out what flexibility loans can offer you and compare accordingly.
- Additional fees. Most refinancing loans will have fees you may be liable to pay. Understand all the fees you may have to pay both upfront and over time and look for a refinancing option with the lowest fees to help you save money over the duration of the loan term.
- Maximum loan amount. Each refinancing option will also have different maximum loan amounts that you can borrow. If you have a certain figure in mind that you need to borrow, look for a loan that will allow you to borrow this amount.
Benefits and drawbacks of refinancing
- Lower interest rate. When you refinance your car loan, one of the most important advantages is typically a lower interest rate. As with any loan, interest is usually what accounts for the highest costs. Keep an eye out for a car loan with a lower interest rate than what you are currently paying. Interest rates tend to fluctuate, so it’s all about selecting the right time to refinance to get the lowest interest rate.
- Lower repayments. If you extend your loan term when you refinance, you can lower your repayments. This is good for those who are struggling to make their regular repayments every month due to their financial situation. Adding additional years onto your car loan will lower your repayments and free up some much-needed cash.
- Get more features from your car loan. Refinancing your car loan may also mean you can benefit from additional features on your car loan that you don’t currently have. This can include the ability to make extra repayments or a redraw facility where you can redraw repayments when you need your funds the most.
- May end up paying more interest over the term of the loan. Refinancing may mean you end up paying more interest in the end. You may refinance with a lower interest rate but extending the loan term may mean you end up paying more interest. It’s recommended you figure out upfront if it is worth refinancing and if you will end up saving on interest.
- Exit costs and setup costs. Switching from your current car loan may mean incurring exit costs that you must pay. You may also be liable for setup costs with your new car loan. These are both additional costs and cons that you need to consider.
How you can refinance your car loan
- Check whether you will be charged a fee for closing your loan before the end of the term. If you will be, factor that in when working out if you'll save.
- If you want to go ahead and refinance, you then need to compare your options. Make sure you meet the eligibility criteria and are aware of all fees and charges. Once you've found the right loan to you, click "Go to Site" to apply.
- Select "refinancing" as the loan purpose.
- Submit the relevant documents and information. This will usually include information about the lender you're with and details about the car.
- Pay off your previous loan. This may be done on your behalf by your new lender or you may be required to organise this yourself.
- Close your previous loan. While the loan is paid off it's important to ensure the loan account is closed.