Is refinancing a car loan worth it for a longer term?
Lower monthly payments from a refinanced car loan often come with extended loan terms that trap you in debt for years longer, sometimes on an older, high-mileage vehicle. While escaping an exorbitant interest rate makes immediate financial sense, stretching out the loan can significantly increase the total interest paid over time.
What people tried
Every workaround mentioned in the threads below. We haven’t tested any of them — and nobody here is claiming they worked.
- 1Keeping the current high-interest loan and finishing it out
- 2Refinancing to a lower rate but continuing to make larger monthly payments to shorten the actual payoff time
- 3Shopping around for a refinancing plan with a shorter term or no hidden fees
- 4Refinancing the remaining loan balance to lower the required monthly minimum payment while continuing to make larger voluntary principal payments
- 5Cutting all possible non-bill expenses
- 6Shopping at the dollar store for groceries
- 7Utilizing local food banks
- 8Using gas station discount cards
- 9Calling the credit union or lender directly to explicitly instruct them to apply extra payments to the principal balance
- 10Waiting several months for credit scores to recover from hard inquiries before attempting to refinance
- 11Making extra monthly payments to chip away at the principal despite allocation confusion
In their words
Unedited, most upvoted first, each linked to the thread it came from.
“Looking to refinance my car and I have a question about what makes the most sense to do.”source ↗
“I had been paying roughly an extra $350-400 a month on principal the last year but can’t keep that pace up with other expenses coming up.”source ↗
“Since my car is older and has about 136K miles on it, I am worried about financing for 5 years being a bad idea. Do I refinance and pay less interest but way longer term, or just finish out my current one?”source ↗
“I got offered a couple of refinancing at like 6%-9% but all at much longer terms.”source ↗
“I can afford the $254, I wanted to refinance because I felt like 22% apr was insane to be paying on a 2008 car”source ↗
“I really am trying. We cut all possible expenses that are not directly bills, we got a gas station discount card, we grocery shop at the dollar store, and we utilize our local food bank.”source ↗
“And I didn’t know that they would apply the extra money to the interest. I only noticed because the finance charge kept going up the higher the payment.”source ↗
“My wife and I are struggling to survive on my income and this is our biggest monthly expense. If we take the offer our monthly payment will go down, but is it worth it in the long run?”source ↗
“I purchased a vehicle in March and unfortunately got a (seemingly) shitty interest rate of 7.5% through a credit union.”source ↗
“On top of that, it looks like the lender is taking the extra money I have been putting into the payment and putting it towards interest and not the principal.”source ↗
“How long should I wait or how much should I pay the car down before looking into refinancing with another lender?”source ↗
Where this came up
People with this problem also raised
- 3Should I take car dealer financing for a rebate and pay it off early?
- 19Is it a smart idea to buy a new car right now?
- 4Should I sell my paid off car to invest the cash?
- 9Is changing your own oil actually worth it?
- 3Should I pay cash for a car or finance it?
- 63Is it worth fixing an old car when repairs cost more than it's worth?