There are several benefits that can come along when you refinance a car loan, such as saving on interest or lowering your monthly payment. But once you’ve captured those savings, what do you do with that extra money?
Having a plan for those funds can help you ensure that it goes to good use, helping future you have a healthier financial life. Here are five smart ways you can use those savings and tips to find the best refinancing offer for your needs:
1. Pay down high-interest debt
High-interest debt, like credit card debt, can be tough to pay off, especially if you’ve only been able to make the minimum payments. You may want to put those extra funds toward paying down your balances, which can help you save money on interest and shorten your timeline to being debt-free. Then you’ll have the financial flexibility to start shifting your focus toward other financial goals, such as paying off other debts (including your car loan) or saving for an upcoming trip.
2. Build up your emergency fund
Another useful way to leverage extra money is to build your emergency fund. Experts typically suggest saving enough to cover all of your necessities, such as rent or mortgage payments, food and utilities for 3 to 6 months. However, if you have an inconsistent income, you may want to aim for a longer timeline, such as a 1-year emergency fund.
Having that money available can help you navigate unexpected expenses without relying as much on credit. You may want to set up automatic transfers to a dedicated savings account to help ensure you save consistently.
3. Increase your retirement contributions
You may want to put extra money from refinancing toward your retirement. Even small contributions can have a big impact once you’re ready to retire, since investments tend to grow over time.
Plus, if you contribute to a 401(k) or a traditional individual retirement account (IRA), those extra deposits can help reduce your taxable income. Just be sure to stay within your annual contribution limits, as excess contributions can create expensive tax issues. For 2026, you can contribute up to $24,500 toward a 401(k), and up to $7,500 toward IRAs (and those over 50 can also take advantage of catch-up contributions as well).1
4. Put it toward educational or business costs
Another way to help maximize your extra money is to use it to fund education or business startup costs. This is because those types of expenses can help translate to future earnings or a higher income. For example, if you can earn a degree, that may help you qualify for higher-paying jobs. Or if you start a successful business, that can become a reliable source of additional income.
Of course, the actual return on those investments can vary. But if you’ve already been considering a certification, degree or business, now may be the time to make those a reality.
5. Save for healthcare costs
Another option you may want to consider is saving money for medical costs. For example, if you have a qualifying high-deductible health plan, you can contribute to a health savings account (HSA), which can be triple tax-advantaged:
- Contributions lower your taxable income
- All HSA investment earnings are tax-free
- If you use the funds for qualifying medical expenses, you won’t pay taxes when you take the money out of the account
And unlike a flexible spending account (FSA), your entire savings can roll over from year to year, allowing it to grow over time.
How to find the best refinancing option
If you’re considering refinancing a car loan, there are a few important factors to keep in mind to maximize your savings. For example, you might look for a lower interest rate to help you save money on interest. Or you could opt for a longer repayment period to lower your monthly payment amount.
Either way, it’s important to shop around to find the kind of savings you’re looking for, at a price you can afford.
Notice: Information provided in this article is for information purposes only and does not necessarily reflect the views of baronton.com or its employees. Please be sure to consult your financial advisor about your financial circumstances and options. This site may receive compensation from advertisers for links to third-party websites.
