About one in five borrowers end up having their car seized because they failed to repay the loan. But many of these repossessions could have been prevented with refinancing.
Loan refinancing can provide you with the financial relief you need to pay off an existing loan and not lose your car.
What Is Title Loan Refinancing?
A title loan means you have borrowed money using the title of your vehicle as collateral. In this case, the lender has a lien against the title until the loan is paid in full.
Refinancing allows you to renegotiate a new loan to pay off the existing loan and start paying on the new one. Typically, when you refinance, you end up with a lower interest rate and can pay off the new loan easier.
While a car title loan refinance process is simple, it is normal that certain doubts are bound to arise in your head. The most evident one is “When does it make sense to refinance?”
Read this guide and get some clarity on when to Refinance your car title loan.
When Should You Refinance a Title Loan?
There are three reasons that people should consider title loan refinancing.
- The interest rate is too high
- They don’t like the quality of service
- They can’t make the monthly payment
If the interest rate is too high, you may find that you’re not making progress on paying off the loan. While you can make the monthly payment, the majority of your payment goes towards paying the interest and not the principal. This leaves you with the prospect of paying off the loan for a lot longer than necessary.
If your current financing company has terrible customer service, it can make repaying the loan unpleasant. Maybe they don’t consistently take out payment at the same time each month. Or they could try to take on incorrect fees to your bill.
A third reason is that you simply cannot make the monthly payment. Maybe your financial situation has changed since taking out the loan, and you can no longer afford it.
Timing Your Refinancing Title Loans
If you’re struggling with customer service issues, refinancing as soon as possible is best. This gets you away from the problematic lender as quickly as possible.
An interest rate that is too high also requires refinancing as soon as possible. The longer you stay in the loan, the more the interest accrues.
If you’re struggling to make the monthly payments, try contacting your current lender first. You may be able to renegotiate the terms of your loan. You should also look at your budget; maybe you can find the monthly payment by curbing spending elsewhere.
Before you take the drastic measure of refinancing, consider adjusting your budget or taking on a side gig.
Should You Refinance Your Title Loan?
Now you know what, when, and why, refinancing title loans is something you should consider. If you find yourself struggling to pay off your current loan or continuously fighting with the loan company, then refinancing can be a smart financial move.
And, lastly, try to make the refinancing decision at an early stage of your loan tenure and have full knowledge of your existing loan agreement to avoid any unnecessary fees or charges.
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