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One of the most common reasons for refinancing a car loan is savings. But, how do you get an idea of how much you could save, without actually applying for the loan? Here are a few steps to get a ballpark estimate!

Gather your information: To calculate potential savings from a refinance, you need to look at several factors related to the original loan and new loan including; the terms, interest rate, and how much you owe on the vehicle. 

For your original loan–you can commonly find these details through your lender’s online banking platform, statements, or requesting the information in-branch. 

Determining these qualities for the new loan can be a bit more tricky. For the interest rate, most lenders offer an online rate sheet that you can use to note the low and high end of the rate scale to use as points of reference. If you know your credit score, this can help you make an informed guess as to where in the spectrum you may fall. Term options are also sometimes listed online but, if not, many lenders offer terms between 24-84 months. Keep in mind that lower interest rates are typically associated with shorter terms. 

Calculate monthly payments: Once you have the information together, you can use an online loan calculator, like our Simple Loan Calculator, to estimate savings by entering in anticipated features of the new loan (ie: term, interest rate, and loan amount). This also provides an opportunity to compare how different terms and interest rates could affect your monthly payment.

Calculate overall savings: To estimate what you could be saving over the life of the loan, simply subtract the monthly payment of the new loan from the monthly payment of the original loan. Then, multiply the monthly savings by the number of months you expect to have the new loan (ie: 24 or 48 months) to estimate the total savings from refinancing.

Have more questions? Drop us an email or call 916.364.1700!