Refinancing Your Car Loan When You Are Flat Broke

Refinancing a loan is when you take out a new loan to replace an existing loan.  It often happens with secured loans, such as auto loans and home mortgages.  For example, let’s say that you took out a car loan for $25,000, and by now, you have paid it down to $20,000.  You can take out a new $20,000 loan, and it will go to pay off the remaining balance of your old loan.  Now, you must pay back the new loan.  This can be an attractive option if the new loan has a lower interest rate or lower monthly payments, enabling you to save money in the short term or the long term.  Unfortunately, loan refinancing is one of many situations where the rich tend to get richer while the poor get poorer.  Unless you are already in a strong financial position, it can be difficult to find loans with better terms than your current loan.  If you refinanced your car loan with a more expensive one in order to make ends meet in the short term, but now you need a long-term solution, contact a Boca Raton debt lawyer.

You Know You Are Rich When Refinancing Your Auto Loan Leaves You With Less Debt Instead of More

Under ideal circumstances, refinancing your car loan can save you a lot of money.  This is the case when your credit score has improved since you took out your original loan, most likely since you have been paying at least the minimum payment each month on your car loan and your other debts.  When this happens, you can refinance for a car loan with a lower interest rate and a shorter repayment term, putting you on the path to own your car free and clear while its resale value is still considerable.

Of course, such good fortune is beyond the reach of most consumers.  Most people refinance car loans to get a lower monthly payment.  Therefore, they choose loans with a longer repayment term, meaning that, by the time the car is paid off, its resale value will be negligible.  Likewise, if your credit score has taken a hit, your interest rate may be even higher on the new loan than on the original one.

Is an Auto Loan Refinance the Best Way to Buy Time?

Buying time is a main motivation for many auto loan refinances, but there are other ways to buy time to pay off your debts.  For example, unsecured debt consolidation loans tend to have long repayment terms, in addition to low interest rates.  An even better solution could be to file for chapter 7 bankruptcy.  Most consumers do not have to forfeit any of their assets in a chapter 7 bankruptcy filing, especially not the vehicles they depend on for their commute to work.

Work With a Debt Lawyer About Getting Out of Auto Loan Debt

A South Florida debt lawyer can help you if the car you drive to work is increasing your debt burden even as it helps you earn an income.  Contact Nowack & Olson, PLLC in Boca Raton, Florida to discuss your case.

Source:

caranddriver.com/auto-loans/a43027563/worth-it-to-refinance-car-loan/