Savings claims are based on monthly payment savings alone. If approved, lower monthly payment may result from a lower interest rate, a longer term or both. You have options. You may also be eligible for an extended term for an even lower monthly payment. If you want to pay much less in interest and pay off your loan earlier, you may want to consider reducing your loan term. Remaining term may be extended for an even lower monthly payment; however, if you choose to increase the term, the overall cost of your new loan may be higher than without refinancing (i.e., more interest and extra payments). Shortening the term or purchasing a voluntary debt cancellation waiver will reduce the monthly payment reduction and increasing the term will result in greater monthly savings but will result in more interest paid and may result in paying more than on existing contract (i.e., interest and extra payments).
Your contract will be a simple interest contract, if approved. With a simple interest contract, finance charges (e.g., interest) are calculated based on the unpaid principal balance of the contract. As each payment is made, the payment amount is applied toward the finance charges that have accrued since the last payment was received. The remaining portion of the payment is applied in accordance with the terms of your contract. The timing of your payments will vary the finance charges you owe. Since finance charges will accrue daily for simple interest contracts, the actual amount of finance charge and the actual amount of your final payment will depend on your payment record. If you make every payment on the due date, you will pay off the contract in the time frame and amount described in your contract. If you make your payments before the due date, you will pay less in finance charges. The later you make your payments after they are due, you will pay more in finance charges. This illustrates the importance of making payments on time.