Reasons to Refinance Your Auto Loan
Sometimes when you first purchase a car, you don’t always receive the best deal you were hoping for. Many buyers will often accept the loan package they are offered at the dealership because it may be convenient at that time. The good news is, you don’t have to stick with that particular loan forever. After a while, you may be eligible to refinance your auto loan which can benefit you and your bank account in the long run. An auto loan refinance involves taking out a new loan to pay off the balance of your existing loan, and transferring the title to the new lender. How does refinancing your auto loan help you?
Pay Less Interest
Often when you purchase a car and you have poor or no credit, you end up with a higher interest rate and in turn, a higher car note. One of the best reasons to refinance a car loan is to lower your interest rate. A lower interest rate can help you save money on the cost of the loan over time. If you previously had bad credit or even no credit and your credit has since improved, it can be worth looking into refinancing your auto loan to see if you may now qualify for a better interest rate. Or, rates in general may be lower than when you originally purchased the vehicle. If the rate you could qualify for is 1% or more lower than the rate you are currently paying, consider refinancing. A significantly lower interest rate will help you pay your loan off faster.
Lower Your Monthly Payment
Perhaps your monthly car payment leaves you stretched thin financially for the rest of the month. Refinancing your auto loan can reduce your monthly car payment, leaving a little more room in your budget. A lower payment can even free up funds to pay off other, higher-rate debt. Having a lower payment can also help you avoid falling behind on payments. Be mindful that you may need to lengthen the life of the loan by 1-2 years in order to significantly lower your monthly payment. Although it will take longer to pay off, the extra funds can be allocated somewhere more useful in your budget.
Pay Off Your Car Loan Sooner
On the other hand, if your income has increased since you purchased your car, you can try to refinance to a shorter loan term to pay it off sooner. This offers a few advantages, one of which being that you won’t have to pay as much total interest over the life of the loan since it will have less time to accrue. Another benefit of paying off your loan sooner is the fact that you can avoid getting upside down in the loan. This phrase refers to when you owe more on the loan than the car is worth. Given that vehicles depreciate over time, that can be a massive benefit, especially if you want to resell the vehicle later or if it gets totaled in an accident.
If you’re thinking about refinancing your auto loan, it’s important to take all factors into consideration to make sure you will actually save money in the long run. Use our financial calculators to help you determine how much you can save by refinancing. Refinance and save with Robins Financial to drive home your savings. To find out how much you could save, give us call or stop by one of our convenient branch locations. If you’re ready to refinance, you can apply online today.
At Robins Financial Credit Union, our mission is to enhance the financial well-being of our members and community. We honor this commitment by providing educational content to help you make the most of your finances. Read our other blog articles to help you gain the financial knowledge you need to succeed.