With the cost of living crisis, rising fuel prices, and the highest levels of inflation in 40 years, it's clear why so many people are starting to struggle and are unable to maintain their monthly bill payments.
The cost of energy is set to increase again in October 2022, and despite the Chancellor, Rishi Sunak, recently stating that all households will be given at least £400 to help with the costs, it's still not enough.
It may eventually get to a point where the most vulnerable households have to prioritise whether they want to stay warm in winter or have food to eat - and that is likely already happening in some parts of the country.
Do you want to refinance your car deal? Car Credible can help you lower your APR and monthly payments.
While the crisis is challenging for us all, there are options available to help you to reduce your costs elsewhere so you are able to put more of your money towards energy, fuel, and everything else you have to pay for each month.
Like remortgaging your house, it's possible to refinance your car and get into a better deal to reduce your APR and monthly repayments. In this article, we look at the benefits of refinancing and why you should consider it as an option if you are eligible.
Lower your APR
When you initially took out your finance plan, you may have had poor credit, or been in a worse state than you are now. If that scenario applied to you, it's likely that you would have been offered a high-interest rate.
If you have been consistently making your payments for 6-12 months, that will have proved to the lender that you can afford and be trusted to make the repayments and therefore your interest rates could be reduced.
By refinancing, you could reduce your interest rate from the figures offered when you first took out the loan, if your credit has improved. That means that over the course of making the rest of the repayments, you won't have to pay as much interest, thus saving you money.
Lower your monthly repayments
If your current repayments are stretching you too far, meaning you have to sacrifice other things or are generally living from payday to payday, then you may want to consider refinancing to reduce your monthly outgoings.
Personal circumstances change all the time, and you may have lost your job or had to fork out a large sum of money on something you had not foreseen. These things happen in life due to no fault of your own, and refinancing may be a great option to help save you some money.
Reducing your monthly repayments will save you money, sometimes quite significantly, but it does mean you would have to increase the term of your contract and stretch the payments across a longer period of time.
This means you would be paying more over time, but month on month paying less than what you have been. You could potentially get to a stage in the future where you can pay the loan off in full or hand the car back to the dealer, so there are certainly options available to you later down the line.
Pay your loan off earlier
On the opposite side of things, you could refinance your deal to reduce the term and pay more per month, rather than saving yourself money on your repayments.
You could have gotten a promotion and pay rise at work or inherited money. Either way, refinancing doesn't necessarily mean you are wanting to save money but to pay your loan off more quickly.
This could end up saving you more money over time than if you started to make extra payments on your current payment plan.
Take advantage of the equity in your car
If you are struggling for money and also don't necessarily need a car anymore, you could 'cash out' with a refinance plan that uses the equity you have in your car as collateral.
For example, if your car was worth £20,000 and you still owe £10,000 in finance, you could get a refinance loan for £15,000, you would pay off the loan with the £10,000 left to pay and take the additional £5,000 for yourself.
However, it's worth noting that there are both limits and downsides to undertaking this type of refinance plan, so you might only want to consider this option if you are in a financial emergency.
If that was the case, it's probably best for you to try to undertake one of the first two refinance options mentioned above, and use this as a last resort. But it's good for you to know this is a potential option if you needed it to be.
Considering refinancing your deal but don't know where to start? Sign up to Car Credible and from there get a free, no-obligation quote to see the options available to you.