Compare refinancing car loans Australia

One major reason why a person may choose to get a car refinance is to save money. More specifically, car owners who want to reduce their monthly repayments may find it helpful to refinance their existing car loan to a different one that offers a lower interest rate, lower fees or different loan terms.

If you have a good credit score and have been consistently meeting your loan repayments, you may be able to negotiate a lower interest rate on your car loan with your existing provider. By comparing your options, you may also find a better interest rate or loan terms that better suit your needs with another lender. A lower interest rate could help you to save money in the long term and decrease your monthly repayments.

Fees can also make a difference, so it’s worth paying attention to the loan’s comparison rate, which incorporates most fees and is designed to give a fuller picture of what a car loan will cost each year than the interest rate does, based on a sample loan amount and term.

Negotiating a longer loan term may also help lower your monthly repayments. The longer the loan term, the more months there are to divide your loan repayment by, which may reduce the amount due each month.

But it’s important to remember that because you would be paying down the loan’s balance more slowly, you would also end up paying more in interest overall if you extended your loan term and all your other loan conditions stayed the same.

If you are getting a car loan refinance to save money, it’s also worth checking that switching fees do not cancel out your potential savings. These could include early exit fees charged by your current lender or any application fees on the new loan.

If you are interested in saving money overall, and not just reducing your monthly repayments, you could also choose to switch to a loan with a lower interest rate but keep your repayments the same, or even pay off extra if the new loan allows you to make extra repayments without penalty. This could help you to pay off the loan faster and pay less interest, so long as you can ensure you aren’t paying too much in the way of extra fees in exchange for that lower interest rate.

There are a few factors you may want to consider before deciding whether and when to refinance an existing car loan. These include:

• the current market value of your car
• how much time is left on your existing loan
• how much money it would cost you to refinance

The market value of your car is important because cars are generally depreciating assets, meaning they tend to lose value over time. If your car has fallen a lot in value and you haven’t paid off much of your car loan, it is possible you may owe your current lender more money than your car is worth. This could make it difficult for you to find another lender willing to offer you a car refinance loan. Also, some lenders may have limits on how old your car can be before they’ll approve a car loan.

Before you refinance a car loan, it could be worth checking how much time you have left on your existing loan term. Car loans often have loan terms that last from one to seven years. If you only have a year or two left, you may want to weigh up how much money you’re likely to save with the new product against any fees you’d be charged for making the switch.

You may also want to work out how much money you would be charged to refinance your car loan. Some lenders may charge an early exit fee if you pay off the loan ahead of schedule, most often if you have a fixed rate car loan.

Every time you apply for a car loan in Australia, including when you refinance an existing one,  your new lender will perform a credit check on you before deciding whether to approve or decline your application. This will typically involve looking into your borrowing history to try and work out how reliable you are as a borrower.

The better your credit score is, the more likely it is you will be approved to refinance with your chosen lender. Many lenders also reserve their cheapest rates for borrowers with a high credit score.

As with any loan application, it may hurt your credit score if you make too many applications within a short space of time or if you miss any required repayments on either your old or new loan.

You can check your credit score for free with Canstar to get a better idea of how lenders see you, and to find out if there are any errors or issues that need to be resolved to help you improve your credit score.

• If you’re able to negotiate a lower interest rate than what you were previously paying, this could leave more savings in your pocket. Of course, if you refinance to a variable rate loan, your interest rate could move up and down.
• If you can secure lower repayments than you paid on your previous loan, this could be particularly helpful if you need a little extra cash flow. A longer loan term could lower your repayments, but be mindful of how it could affect your total interest payments over the life of the loan. Alternatively, you could keep your repayments the same as what you’re already paying, which wouldn’t affect your cash flow in the short term but could shorten the time taken to pay off the loan and save you money overall.
• You could potentially find or negotiate a loan with more features to get bang for your buck and make the most of your car loan. These could include having the flexibility to make additional repayments or the option to redraw money when you need it.

• You might end up paying more interest over the life of your loan if you negotiate a longer loan term than the time left on your existing loan. While you might be able to refinance with a lower interest rate, the extended loan term may mean you end up paying more interest over the life of the loan.
• Switching car loans might mean you have to pay a fee for exiting your previous contract, and possibly an application fee and ongoing fees for the new loan as well. It’s important to consider this in your research so you can properly weigh up your options.
• Even if you end up with a lower interest rate, your existing loan may have features and tools that the new loan doesn’t. This could affect how easy it is to manage your loan.

If you want to refinance your car loan and possibly save some extra money, thoroughly comparing your options and making sure you are aware of all applicable fees and charges attached to both your old and new loans could be a good start.

Here are a few other key tips to consider:

• Check that your loan costs will be lower than on your previous loan. Consider the interest rate and any fees that may apply, including any early exit fees that may be charged if you get out of your old loan early.
• Check that you won’t end up paying more interest over the life of the loan. Remember, while a longer loan term may reduce your monthly repayments, it could also mean you end up paying more interest in the long run, even if your interest rate doesn’t change.
• Make sure the new loan has the features you want. These could include the flexibility to make additional repayments without penalty, or having the use of a redraw facility that allows you to withdraw extra repayments you have made if you need to. These features may help you pay off the loan sooner.
• Make sure you are in a strong position to refinance before applying for the new loan.

If your existing loan is secured by your vehicle, as many car loans are, this may make refinancing more complex. For example, the new lender may not accept the vehicle as security if its value has dropped since you purchased it or if it is over a certain age. As an alternative, you may be able to refinance to an unsecured car loan, but it may be difficult to find an unsecured loan with a lower rate if your current loan is secured.