Auto loan refinancing is the process of replacing your existing car loan with a new one. Borrowers typically refinance to secure a lower interest rate, a different loan term, or to take cash out against their vehicle's equity. Refinancing can lead to significant savings, especially if interest rates have fallen since you took out your original loan, or if your credit score has improved.
How the Calculator Works:
This calculator helps you estimate the potential interest savings by comparing your current auto loan's total interest paid to the total interest you would pay with a new, refinanced loan. It considers your current loan balance, interest rate, remaining term, and the proposed new interest rate and term.
Current Total Interest: Calculated based on your existing loan's principal, interest rate, and remaining term. This represents the total interest you would pay if you kept your current loan.
New Loan Total Interest: Calculated based on the current loan balance (as the principal for the new loan), the new interest rate, and the new loan term. This represents the total interest you would pay on the refinanced loan.
Potential Savings: The difference between the Current Total Interest and the New Loan Total Interest. A positive number indicates savings.
When to Consider Refinancing:
Lower Interest Rates: If market interest rates have dropped, or your credit score has improved significantly, you might qualify for a lower APR, saving you money on interest.
Shorter Term, Same Payment: You might be able to shorten your loan term while keeping your monthly payment roughly the same, paying off the car faster and reducing overall interest.
Longer Term, Lower Payment: If you need to lower your monthly payments for cash flow reasons, refinancing to a longer term might be an option, though this usually increases the total interest paid over the life of the loan.
Remove Co-signer: If your credit has improved, you may be able to refinance to remove a co-signer from the loan.
Important Considerations:
While refinancing can offer benefits, it's essential to consider all aspects. Sometimes, extending the loan term to lower monthly payments can result in paying more interest overall. Always compare the total cost of the new loan against the total remaining cost of your current loan. Additionally, some lenders may charge origination fees or other costs associated with refinancing, which should be factored into your savings calculation.
function calculateMonthlyPayment(principal, annualRate, termInMonths) {
var monthlyRate = annualRate / 100 / 12;
if (monthlyRate === 0) {
return principal / termInMonths;
}
var payment = principal * (monthlyRate * Math.pow(1 + monthlyRate, termInMonths)) / (Math.pow(1 + monthlyRate, termInMonths) – 1);
return isNaN(payment) ? 0 : payment;
}
function calculateTotalInterest(principal, annualRate, termInMonths) {
var monthlyPayment = calculateMonthlyPayment(principal, annualRate, termInMonths);
if (monthlyPayment === 0) return 0;
var totalPaid = monthlyPayment * termInMonths;
var totalInterest = totalPaid – principal;
return isNaN(totalInterest) || totalInterest < 0 ? 0 : totalInterest;
}
function calculateRefinance() {
var currentLoanBalance = parseFloat(document.getElementById("currentLoanBalance").value);
var currentInterestRate = parseFloat(document.getElementById("currentInterestRate").value);
var remainingMonths = parseInt(document.getElementById("remainingMonths").value);
var newInterestRate = parseFloat(document.getElementById("newInterestRate").value);
var newLoanTerm = parseInt(document.getElementById("newLoanTerm").value);
var savings = 0;
if (isNaN(currentLoanBalance) || isNaN(currentInterestRate) || isNaN(remainingMonths) ||
isNaN(newInterestRate) || isNaN(newLoanTerm) ||
currentLoanBalance <= 0 || currentInterestRate < 0 || remainingMonths <= 0 ||
newInterestRate < 0 || newLoanTerm 0) {
savings = potentialSavings;
} else {
// If new loan costs more or same interest, savings are 0 or negative.
// Displaying 0 savings if it's not beneficial.
savings = 0;
}
document.getElementById("totalSavings").textContent = "$" + savings.toFixed(2);
}