Are you considering refinancing your current car loan or loans in order to achieve a lower monthly payment. It's true, when you refinance car loans you can save you money, especially if you obtain a significantly lower interest rate on the new loan. However, there could be hidden fees or costs associated with refinancing that you may not be aware of which would ultimately make the process quite expensive.
Typically there are no hidden fees or costs associated with refinancing auto loans, but there are those rare occasions where you might have to pay fees or costs. When you're shopping for your original car loan, it's important that you identify these types of fees before you actually agree to the loan. Chances are you can find a lender that doesn't charge you for miscellaneous items, so you should never have to settle for one that does.
Early Repayment Fee
This type of fee is very uncommon these days, but there is the chance that some lenders will try to include this in the vehicle loan terms. This would mean that if you wanted to refinance your vehicle loan, you could be charged an early repayment fee on the original loan since you would be paying it off in full earlier than
stated on the initial agreement. This is the lender's way of making the money they would have made in interest costs had you continued to pay the loan in full for the life of the loan.
In some instances lenders will charge a large fee for the process of refinancing your loan. This is known as a refinance cost, and is a cost that you can avoid if you're willing to shop around with different lenders that don't charge this type of cost.
Lenders may charge an application fee if you wish to apply for a new loan with them. Simply inquiring as to whether or not refinancing auto loans with a particular lender should not be enough justification for a fee. Rather, lenders should allow borrowers to apply for loans without charging them for it. This is simply not good business, and you can just as easily find lenders who do not charge you to go through the simple application process.
Finally, before you refinance car loans, be sure and ask your lender if you can expect any other hidden fees or charges. This could effect your final decision as to whether or not you choose that particular lender for your refinancing needs.