Credit score is an important factor in refinancing car loans

Credit unions and some banks are promoting the idea of refinancing auto loans in order to reduce rates, but the savings could be negligible, according to the Belleville News Democrat. Hank Risley, senior vice president of retail lending for Michigan-based Independent Bank, said consumers typically save about $20 a month by refinancing a car loan. Risley recommended paying off a credit card or other loan at 20 percent or higher when refinancing a car loan at less than 5 percent and borrowing against the car. "It's all going to depend on the customer's credit score," said Steve Korody, consumer loan specialist for Huntington Bank, according to the news source. Korody said that discipline is needed when making these kinds of credit decisions, in order to refinance a car, tap into the equity and pay off the debt at a lower rate by essentially consolidating credit card debt on the card. New-car loan rates are influenced by credit score and a car's age. A recent study by the Center for Responsible Lending found that consumers who financed a car through a dealership in 2009 will pay more than $25.8 billion in extra interest because of dealer interest rate markups.