When To Refinance A Car Loan

blog_when-to-refiEven in our improving economy, interest rates remain very low. For many, this is a prime time to refinance a car loan, mortgages and so on. Refinancing can effectively save you thousands of dollars over the life of the loan, but it will also extend your payments out longer. This creates a delicate juggling act that you must carefully weigh before taking the plunge. The process, if you decide to pursue it, should be quick and easy. Here are the situations in which an auto loan refinance can be advantageous.


Dropping Interest Rates

If current interest rates are at least a few points lower than they were when you first purchased your car, it may be a good time to save some money. When you refinance, you will be taking out a new loan which will be considered a used car loan. This means the rate could very well be higher than on most new car loans. Make sure you check the proper rates before pulling the trigger.


Better Credit

If you have significantly improved your credit score, it could be a great time to refinance. A higher credit score almost always results in lower loan rates. You may have financed your original purchase at a rate as high as 18 percent if you had bad credit. Improving your score can significantly reduce that and save you a lot of money in the process.


Sub-Prime Rates

Even if you had good credit, you may have received an original rate that was less than prime. Many dealer loans have a higher rate because consumers don’t think to shop around first. If this is the case for you, seeking a third-party refinancer can significantly drop your rate and, as a result, get you lower payments.


Financial Setbacks

Have you encountered a personal financial landscape problem? If you recently lost your job or are experiencing other financial setbacks, but your credit is still strong, refinancing your loan can help to ease the burden by lowering your monthly payments in exchange for a longer term loan.


Buying out a Lease

You may have leased a vehicle and are looking to keep the car instead of turning it in. In this case, your lender can help you get a new loan that can result in payments around the same rate as those you have been making up to this point, or even less. To get the best rate, talk not only to the dealer but to banks and credit unions as well.


Average Savings

If you are eligible for an auto loan refinance, the savings can be significant. Depending on how high your original interest rate was, you can end up saving $30 or more per month on your payments, which over the life of the loan is a savings of over $2,000. However, you need to be sure you are eligible. If you owe more than the vehicle is worth, you may be refused a refinance. Likewise, if your car is old or if you owe too much you could be turned down.


If you think refinancing is a good option for you, we may be able to help. Check out our refinance rates page, and apply today!

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