Refinance Car Loan

Refinance Car Loan

Refinance Car Loan

Cruising down the open road with the windows down feels great, but that feeling can quickly fade when you glance at your car loan statement. If your monthly car payment feels more like a roadblock than a smooth ride, then refinancing your car loan might be the key to unlocking some financial freedom. This post will be your road map, explaining what refinancing is, how it can potentially save you money, and whether it’s the right turn for you. Buckle up and get ready to refinance your car loan and shift your car payment into a more comfortable gear!

Understanding Car Loans

1. What a car loan is and how it works

A car loan finances the purchase of a vehicle. The lender provides a lump sum of money, which you agree to repay in monthly installments over a set period. Often, the vehicle itself serves as collateral, meaning if you default on the loan, the lender can repossess the car to recover their losses. Car loans typically come with either fixed or variable interest rates. A fixed-rate loan maintains the same interest rate throughout the term, providing predictable payments, while a variable rate can fluctuate based on market conditions, potentially changing your monthly payment amounts.

When shopping for a car loan, it is crucial to compare interest rates, loan terms, and fees from multiple lenders to secure the best deal. Factors such as your credit score and the amount of your down payment significantly influence the terms you may be offered. Additionally, consider the total cost of the loan over its entire duration, not just the monthly payments. Thoroughly evaluating these aspects will help you make an informed decision and manage the overall expense effectively.

2. Different types of car loans

Not all car loans are created equal. Here’s a breakdown of the most common types to help you choose the right one:

  • Secured vs. Unsecured Loans: Secured loans use your car as collateral, typically offering lower interest rates. If you default, the lender can repossess the car. Unsecured loans don’t require collateral but come with higher interest rates due to the increased risk for the lender.
  • New Car vs. Used Car Loans: New car loans often have lower interest rates than used car loans, reflecting the lower risk associated with newer vehicles. However, new cars depreciate quickly, meaning you might owe more than the car’s worth early on in the loan. Used car loans typically have higher interest rates, but depreciation is a smaller concern as the car’s value has already dropped significantly.
  • Fixed vs. Variable Interest Rates: Fixed-rate loans offer stability – the interest rate remains constant throughout the loan term, making budgeting easier. Variable-rate loans can have lower initial rates, but the rate can fluctuate based on market conditions, potentially leading to higher payments in the future.
  • Lease Purchase Agreements: This option allows you to lease a car with the possibility of buying it at the end of the lease term. While offering lower monthly payments initially, you may end up paying more overall compared to a traditional car loan.

3. The concept of interest rates and how they affect the total cost of a car loan.

Interest rates are crucial in car loans, determining the extra cost beyond the original loan amount. Expressed as a percentage, they are charged by the lender for borrowing money. In South Africa, these rates vary based on the lender, your credit score, and other factors, making it essential to compare rates from multiple lenders to get the best deal.

For example, a R100,000 car loan at a 10% interest rate over five years will accrue R12,748.71 in interest, totaling R112,748.71. Higher interest rates result in higher monthly payments and total loan costs, underscoring the importance of shopping for the lowest rates possible.

Reasons to Refinance a Car Loan

Lower interest rates: One of the most common reasons to refinance a car loan is to secure a lower interest rate. If your credit score has improved since you first took out the loan or if interest rates have gone down, you may be able to qualify for a lower rate, which can save you money over the life of the loan.


Let’s say you originally took out a car loan for R200,000 with a 10% interest rate over five years. If you were to refinance the loan at a 6% interest rate, you would save over R14,000 in interest payments over the life of the loan.

Lower monthly payments: Refinancing can also help lower your monthly car payments, making it easier to manage your budget. This can be especially helpful if you’re facing financial challenges or unexpected expenses.


If you originally took out a car loan for R25,000 over three years at a 10% interest rate, your monthly payment would be R806.16. If you were to refinance the loan at a 6% interest rate, your monthly payment would drop to R763.55, saving you over R1,000 over the life of the loan.

Pay off the loan faster: Refinancing can also allow you to pay off your car loan faster, as you can choose a shorter loan term or a lower interest rate. This can help you save money on interest payments and own your car outright sooner.


If you originally took out a car loan for R150,000 over six years at a 12% interest rate, your monthly payment would be R2,887.12. If you were to refinance the loan for R120,000 at a 6% interest rate over four years, your monthly payment would be R2,790.03, and you would pay off the loan two years sooner.

Improve your credit score: Refinancing can also be a way to improve your credit score, as making consistent payments on a new loan can demonstrate responsible credit behavior. This can help you qualify for better loan terms and interest rates in the future.

Pros and Cons of Refinancing Your Car Loan

Feeling the squeeze of your car loan payment? Refinancing could offer relief, but it’s not a one-way street. Let’s explore the pros and cons to see if it’s the right turn for you.


  • Potentially Lower Interest Rate: Save money each month and overall.
  • Lower Payment (Maybe): Free up cash flow for other goals.
  • Pay Off Faster (Optional): Shorten your loan term and own your car sooner.
  • Consolidate Debt (Strategic): Combine high-interest debt into a lower-rate loan.


  • New Loan Fees: Origination and application fees can eat into savings.
  • Longer Loan (Risky): Lower payment but more interest paid overall.
  • Qualification Challenge: Lower credit score might disqualify you for a better rate.
  • Underwater Risk: If your car’s worth less than you owe, refinancing might be denied.

If you’re struggling with your credit, consider visiting our website’s “How To Get A Car On Bad Credit” page for tips on how to improve your credit score and potentially qualify for better loan terms.

How to Refinance Your Car Loan

Feeling the burn of your car loan payment? Refinancing can be your pit stop for potential savings! Here’s a roadmap to navigate the process and secure the best deal:

  • Shop Smart: Research lenders (banks, credit unions, online) for competitive rates & terms.
  • Compare Wisely: Focus on more than just the lowest rate – longer terms can cost more overall.
  • Apply & Get Approved: Submit documents (proof of income, car registration, insurance) to your chosen lender.
  • Finalize & Save: Review loan terms, sign if it saves you money, and enjoy potentially lower payments!

Choosing the Right Lender

Choosing the right lender is a critical part of the car loan refinancing process. Here are some factors to consider when making your decision:

  1. Interest rates: Look for lenders that offer competitive interest rates to help you save money over the life of your loan. Keep in mind that interest rates can vary based on your credit score and other factors.
  2. Fees: Some lenders may charge application fees, origination fees, or other fees that can add up quickly. Be sure to read the fine print and understand all of the fees associated with a loan before agreeing to it.
  3. Customer service: Consider the quality of customer service offered by the lender. Are they responsive to your inquiries and concerns? Do they have a reputation for providing excellent customer service?
  4. Reputation: Look for lenders with a good reputation in the industry. Check online reviews and ratings to get an idea of what other customers have experienced with the lender.

Reputable Refinancing Lenders in South Africa

  1. Nedbank
  2. WesBank 
  3. Standard Bank
  4. First National Bank
  5. Absa
  6. Capitec Bank

Choosing the right lender can boost your credit score. Timely payments and paying off your loan on schedule show financial responsibility, improving your credit over time. At Johannesburg Pretoria Cars, we help you find the right lender and guide you through refinancing..

Take the Wheel of Your Finances with Refinancing!

So there you have it! Refinancing your car loan can be a powerful tool to save money and gain control of your finances. Remember, the decision to refinance depends on your individual circumstances. But with the knowledge you’ve gained here, you’re well-equipped to navigate this financial highway and decide if refinancing can put you in the driver’s seat of your car loan.

Ready to explore your refinancing options? Many lenders offer online tools to get a quick quote. However, it’s always wise to shop around and compare rates from several lenders before making a final decision.

Remember, with careful planning and the right strategy, refinancing your car loan can transform a burdensome payment into a smooth ride towards financial freedom!

5 Replies to “Refinance Car Loan”

  1. Pingback: 10 Best Cars for Uber in South Africa – PROS & CONS | 2023

  2. Financial Planning

    Your blog post about loans was a true gift. Your words and expertise have inspired me . Thank you for sharing your passion with the world!

  3. Petros

    Hi please assist on car finance

    1. Lesego (Post author)

      Hello, unfortunately, we do not currently provide financial services.

    2. Lesego (Post author)

      Hi there,

      Unfortunately, we don’t offer financing services at Johannesburg Pretoria Cars; we’re a car listing platform. For finance, we suggest checking with local banks or credit unions for suitable options.

      Let us know if you have any other questions.

      Best regards.

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