When you refinance a car loan, you are replacing your current loan with a new one, to get better terms. The advantages of auto refinancing include lower monthly payments and lower interest rates, which means you save money in the long run. This is especially useful if you had bad credit when you first took out the loan.
Save Money by Refinancing Your Car Loan
The most significant – and truly unique – advantages of refinancing a car loan are that you can lower your monthly payment and save money each month, as well as get a lower interest rate to save even more for the remainder of the loan.
If you took out an auto loan when your credit was less than stellar, you may be considering refinancing your vehicle. Your interest rate is most likely higher than average, and interest charges can quickly add up.
What Happens If You Refinance Your Auto Loan?
To refinance, you must ensure that your credit score has improved since the original car loan was taken out and that at least a year has passed. If it has, the next step is to find a lender who will refinance your loan. You can begin with your current lender, but you should also shop around to see what other lenders have to offer.
Once you’ve chosen a lender, you must decide which path you want to take and what is best for your situation:
What Are the Benefits of Refinancing Auto Loans?
Apply for a lower interest rate – This is the best option when refinancing because it saves you money in the long run. This reduces both your monthly payment and your total interest charges. If you’re not sure your credit score will get you the best interest rate, you can increase your chances by adding a cosigner to the loan.
Extend the loan term – if you can’t get a cosigner, your credit hasn’t improved much, or you’re struggling financially. When you do this, you end up paying more in interest charges, but it may be the quick fix you need to make your monthly payment more affordable. When your financial situation improves, you can pay more each month to reduce those extra interest charges and save money on your auto loan.
Finally, keep in mind that not all vehicles are eligible for refinancing. Lenders have specific rules about the vehicle’s age, mileage, condition, title, and how much equity it has.
Refinancing a car loan is an excellent way to save money. You can’t refinance your car loan right after you sign up for it, but after at least a year, when you know where your credit stands, you can think about it.
To know more about refinancing auto loans, get in touch with Heritage Financial CU. We can help assist you with your auto refinancing needs.