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What’S The Interest Rate On Your Car Loan?
by Jeff Bressler

Anyone who owns a home is certainly familiar with what their mortgage interest rate is. But a large number of drivers, who purchase cars that can cost $30,000 or more, cannot remember what their interest rate is.
As a matter of fact, according to a recent study, 61% of consumers have no idea what the APR for their car loan is.

The study commissioned by Capital One pointed out that many drivers are probably paying more than necessary. Auto loans can be refinanced saving the consumer money. Another telling statistic from the study showed that 62% of respondents had no idea that they could refinance their auto loan and save money. As a matter of fact I’m in that majority. I never thought to check out the refinancing route on my Mazda MX-5 Miata.

The amount of money you can save via the refinancing path depends on a number of factors including your current credit rating, how much remains on your current loan and the current interest rate vs. the rate of your existing loan.

Let’s look at a thumbnail scenario based on a 5 year $25,000 auto loan taken out one year ago at 9.95%.

If the APR was reduced by 3 percentage points a consumer would save $1,423 over the remaining four years of the loan or about $30 per month simply by refinancing at 6.95 percent APR.

If the APR was reduced by 2 percentage points that same consumer would save $954 over the remaining four years of the loan or about $20 per month by refinancing at 7.95 percent APR.

If the APR was reduced by 1 percentage point that consumer would save $480 over the remaining four years of the loan or about $10 per month by refinancing online at 8.95 percent.

There are some caveats though. Determine if your current auto loan has any penalties for paying off the loan early. This will impact how much you can save from refinancing. And as mentioned, your interest rate will depend on your credit worthiness.

Published: Oct 4,2008 12:07
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