You Can Refinance Your House â?? Now Refinance Your Car
Homeowners still paying on mortgages have been able to refinance those mortgages for years. Refinancing is a way to save money by getting a lower interest rate that reduces the overall cost of borrowing for people who extend their mortgages to full term. Now a peer-to-peer financing platform is taking the same idea and applying it to car loans.
A This Is Money story published back in May (2016) detailed the new loan offers being made by Zopa, a peer-to-peer platform already well-established as a personal loan provider. Their car refinance product is the first of its kind in the UK, offering service that is administered entirely online and surprisingly free of the typical banking hassle.
Customers with cars no older than ten years can apply online by providing a bit of personal information along with information about the car's registration, current mileage, and existing car loan. Applications are reviewed and a decision made within two days. Once approved, the customer's current car loan is paid off by Zopa in amounts anywhere from Â£1,000 - Â£25,000.
The benefits of using a peer-to-peer loan of this nature include:
- Lower Interest Rates â?? Lenders who service customers through the peer-to-peer model tend to offer lower interest rates than standard banks. That's part of the appeal. It is also how they attract new business.
- No Harm to Credit â?? When Zopa checks the customer's credit prior to approving a loan, there is no harm done to that individual's credit report â?? even if the applicant is rejected.
- No Early Repayment Penalties â?? Zopa does not charge consumers an early repayment penalty. You can refinance your car now, then pay off your loan earlier than expected thanks to the low interest rates. No additional charges are involved.
There is one caveat here that needs to be considered: Zopa will only pay off the outstanding amount on your existing car loan. If your bank charges you an early repayment fee, you will be responsible for making that payment yourself. Otherwise, Zopa's car refinance loan appears to be a pretty good deal.
Think Twice before You Borrow
As with any financial product, it pays to think twice before you borrow to refinance a car. The fact that you can refinance does not necessarily make it a good idea. You have to look at your outstanding balance, the condition of the car, your monthly budget, and any other factors that might influence short-term affordability or your long-term financial picture.
You should also consider as many lenders as possible rather than reading this article and immediately deciding to borrow from Zopa. We are not personally recommending Zopa ourselves; we are simply using them as an illustration of the fact that it is now possible to refinance a car loan. It could be there are other peer-to-peer platforms following suit. There is also the possibility of taking on a standard personal loan or a secured loan to pay off what you owe on your car.
In the end, the goal is to pay as little as possible to service existing debt. You should be aiming for the lowest possible interest rates along with minimal fees and charges for settling your debt. These principles apply to any kind of borrowing, be it refinancing to pay off your car or borrowing to make home improvements.
If you can save hundreds of pounds refinancing your car through a peer-to-peer lending platform, go for it. If not, a refinancing tool like the one offered by Zopa may not be in your best interests.
- This Is Money â?? http://www.thisismoney.co.uk/money/cars/article-3598692/Zopa-launches-UK-online-car-refinance-tool-let-switch-cheaper-loan-save-hundreds-pounds.htm
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