You have worked hard to eliminate your credit card debt. Now, you realize that there is other debt, such as an auto loan, that you’d like to take care of through refinancing or debt consolidation. Keep the following considerations in mind when exploring your options.
Your credit score is an important factor in determining the interest rate you qualify for, so you need to know your credit score to properly evaluate the potential benefits of refinancing your debt.
Generally speaking, a lower credit score results in a higher interest rate. If you need to improve your score, you could focus on a variety of factors that contribute to your credit score, including on-time bill payments, amount of debt load and length of credit history.
If you refinance a car loan to a longer term, you may experience lower monthly payments. However, you could end up paying more in interest over time.
You will be borrowing against the value of your house while extending the term of the auto loan, which will likely extend beyond the life of your vehicle.
Be sure to closely read your original loan documents to determine if there are any prepayment penalties should you choose to refinance. Any penalties/costs should be included in your refinancing evaluation.
