Many Americans currently paying off a car loan may realize that their payments are mostly going toward the interest rather than the actual cost of the car. Though many lenders and dealerships will offer car loans, some consumers are more concerned with having a new car than with the terms of their loan. Unfortunately, this is a common problem, but there is a real solution.
One solution is to get an auto loan refinanced in order to get a lower interest rate. This way, consumers put money toward paying off the cost of their vehicle rather than paying toward interest. It is typically better to refinance sooner than later, as the interest on any loan accrues each day – therefore, getting a new loan early on can potentially save quite a bit of money.
Of course, there is one way to prevent paying too much in interest altogether: pay attention to loan terms. If there is both a high interest rate and a long term, this is a tell-tale sign that your loan amount will significantly exceed the value of your vehicle (LTV ratio).