Refinancing your auto loan may lead to a lower monthly payment, a shorter term or both. Your outcome depends on a wide range of factors, including the value of your vehicle, how much you owe on your current loan and your credit standing. If any of these factors have changed since you bought your car, you owe it to yourself to check out your refinancing options. Here are some common reasons why refinancing your auto loan could be a good idea.
If your credit score improves
Your score not only could determine the interest rate on your car loan, it may impact the premium you pay for auto insurance and what other fees your lender might charge. If your current credit score is higher than it was when you bought your car, refinancing could be a good option. Ask your lender to consider giving you a lower rate.
You didn't shop around before you borrowed
If you've never shopped around for a car loan, it's worth doing. By getting multiple offers, you can ensure you're getting the best price available for your auto loan. LGFCU offers low fixed rate loans on used autos. Try to do your shopping inside a 15-day period. Otherwise, the multiple checks on your credit could negatively impact your credit score. Again, it may pay to see if there’s a way to refinance at a lower rate.
You need to modify your monthly payment
You may be in a much better financial situation now than when you bought your car. You may have a better job or more financial security. You may have paid off credit card or other debt. These things free up how much you can pay per month. On the other hand, if money is tight, it might be a good idea to refinance into a longer term if you have equity in your vehicle. While you might end up paying more in interest, you can reduce your monthly payment and free up money you need right now.
You’re ready to buy out your car lease
If your car lease is nearing the end and you want to keep your car, it could make sense to finance the vehicle at a lower rate. Check your vehicle contract to see the residual value. If your car’s value is less than today’s appraised price, you may benefit from the refinance.
If you’re thinking about refinancing your car, consider your personal situation and see how much you may be able to save.
The advice provided is for informational purposes only.