If you feel your monthly car payments are too high, you may want to refinance your car loan. After all, who can’t benefit from saving some extra money. As your hometown credit union, our goal is to help our members get into a better financial position. Auto loan refinance might be a good way for you to do just that. Here are some important reasons to think about refinancing your auto loan.
1 Your car loan interest rate is too high.
Interest rates may have dropped since your original loan. This is one of the main reasons many borrowers contemplate auto loan refinance. Rates may have been higher when you first borrowed, leaving you with a higher payment than you’d like. It’s also possible you just didn’t do enough research when auto loan shopping and you didn’t get a great rate. Don’t make this same mistake twice. Always shop around to find the best auto loan rates. Start with a local credit union, such as Choice One Community Credit Union. Auto loan refinancing to a lower rate may help you lower your monthly payments, pay less in interest over the life of the loan, pay off your loan faster, and/or more.
2 You can’t afford your monthly car loan payment.
You might have gotten in a little over your head with that new car, suffered some financial setbacks or your salary took a hit. Now you’re having a hard time making the loan payments. Sound familiar? Auto loan refinance might be a good option to help you possibly lower the rate and extend the term of the loan. Your credit union representative will be able to help you calculate a payment to fit your budget. Just be aware that extending the term of an auto loan may mean paying more interest over the life of the loan. Stretching the term may also put you underwater with your auto loan. This means that you may owe the lender more than your car is actually worth. Be sure to consider all the possibilities.
3 Your financial situation improved, and you want to pay your car loan off faster.
What a great reason to refinance. Who doesn’t want to be in this situation? You may have gotten an increase in salary or paid off other bills that put an influx of cash into your monthly budget. Whatever the reason, refinancing to a lower interest rate and shortening the term of the auto loan can help you pay your loan off faster. Always aim for that lower interest rate as well as shorter-term if a faster payoff is your goal.
4 Your credit score improved.
When you applied for your current car loan, you may have been dealing with some poor credit issues. This might have meant not qualifying for the best possible auto loan rate. We applaud you for improving your credit score if that’s the case. Auto loan refinance can help you take advantage of a better rate if your credit score has improved significantly. Remember, a better credit score usually qualifies you for a lower rate.
Refinancing your car loan
Car loan refinance can be a smart decision, especially if you realize you can save money. You may be wondering how long you actually have to wait before refinancing your auto loan. Well, you’ll be happy to learn there’s no minimum amount of time to wait. As soon as you realize you can get a better loan, you can refinance. When comparing loans, be sure to ask about all costs and fees involved in auto loan refinance. Check to see if your existing auto loan has any prepayment penalties as well. Auto loan refinancing may save you money, but it should only be considered under the right circumstances. If your current auto loan is nearly paid off, it probably isn’t worth it to refinance. Learn more about auto loan refinancing or view our current auto loan rates at Choice One Community Credit Union.