Current APR vs new offer: monthly savings, total interest savings, and the fee break-even
| Rate Cut | Old → New Payment | Monthly Savings | Total Interest Saved |
|---|---|---|---|
| 11.9% → 9.9% (−2 pts) | $525.70 → $506.29 | $19.40 | $931 |
| 11.9% → 7.9% (−4 pts) | $525.70 → $487.32 | $38.38 | $1,842 |
| 11.9% → 5.9% (−6 pts) | $525.70 → $468.78 | $56.91 | $2,732 |
Savings scale almost linearly with both the rate cut and the balance. Half the balance, half the savings; half the remaining term, roughly half the savings, because interest has less time to compound against you.
| Refi the $18,000 / 9.9% / 36-month loan to 5.9%… | 36-month term | 60-month term |
|---|---|---|
| New payment | $546.78 | $347.15 |
| Total interest | $1,684.07 | $2,829.24 |
| Months added | 0 | +24 |
| Total saved vs staying (after $300 fee) | $894.66 | −$250.52 |
The 60-month payment looks like relief, but the extra two years of interest more than eat the rate cut. That's the pattern to watch whenever a lender shows you a much lower payment: ask what the term did.
Refinancing replaces your current loan with a new one: same balance, different rate, possibly different term. Whether that trade wins depends on three numbers working together. This calculator runs both loans side by side and shows the only outcomes that matter: what you save each month, what you save in total after fees, and how long the fees take to pay back.
Each payment comes from the standard amortization formula P × r ÷ (1 − (1 + r)−n), where r is the monthly rate and n the months. Interest remaining on each loan is payment × months − balance. Total savings is current interest remaining minus (new interest + fees). Break-even is fees ÷ monthly savings.
Pull your current balance and APR from your latest statement, not your memory; payoffs drift from statements by a few weeks of interest. Months remaining is your payoff date in months. For the offer side, get a real quote from a credit union or bank before you type anything, and ask the lender for the complete fee total, since origination and lien-transfer charges are exactly what the break-even math needs.
You owe $18,000 at 9.9% APR with 36 payments left. The payment on that is $579.96, and the interest remaining is $579.96 × 36 − $18,000 = $2,878.73. A credit union offers 5.9% for the same 36 months with $300 in fees. The new payment is $546.78, so you save $33.18 every month. New interest: $546.78 × 36 − $18,000 = $1,684.07. Net of fees you keep $2,878.73 − $1,684.07 − $300 = $894.66, and the $300 fee repays itself in 9 months ($300 ÷ $33.18 = 9.04). On a 36-month runway, that's a clear yes.
Now the cautionary twin. Same loan, but the lender also offers 60 months at 5.9%. Payment drops to $347.15, which feels like a raise. But interest runs $2,829.24 across those five years, and after the fee you're $250.52 worse off than if you'd done nothing. Longer terms sell lower payments by collecting more interest. If cash flow is genuinely tight, that trade can still be rational; just make it knowingly.
Three conditions, ideally together: your new APR beats the current one by a point or more, you have 24-plus months left on the loan, and your credit or the rate market has improved since you signed. An $18,000 balance at 9.9% with 36 months left refinanced to 5.9% saves $33.18 a month and $894.66 after a $300 fee. If you have under a year left, there's rarely enough interest remaining to refinance for.
Typically $50 to $500 all-in. Some lenders charge no origination fee but recover it in the rate, and a few states charge a lien-transfer or title fee of $5 to $75 that you pay either way. Because fees are small, most rate cuts of one point or more on a meaningful balance break even in well under a year. The calculator shows your exact break-even month.
It causes a small, temporary dip. Shopping refinance quotes triggers hard inquiries, but credit scoring models count multiple auto-loan inquiries within a 14-to-45-day window as one, and the effect fades in a few months. The new loan replacing the old one barely moves your score. Rate-shopping responsibly is the right move.
You can, but only if your score has improved since you took the loan, since the whole game is beating your current APR. A 640 score that replaces a 580-score loan at 18% might land 12% to 14% and save real money. If your score has dropped, refinancing usually raises your rate, and extending the term to force a lower payment just adds interest.
Usually no, and the math is sneaky. Refinancing an $18,000 balance from 9.9% with 36 months left into 5.9% over 60 months cuts the payment by $232.81 a month but ends up costing about $251 more than staying put, once the extra two years of interest and the $300 fee are counted. A lower payment financed by a longer term is borrowing, not saving. Keep the term at or under your remaining months unless you're rescuing a budget.