When purchasing a new car, you may not realize that you aren’t stuck with the original loan. If you’re unhappy with your original auto loan, refinancing may be the answer. Refinancing your auto loan could potentially reduce your monthly payment, but will it save you money in the long run? Whether or not refinancing will be beneficial for you depends a lot on timing. Consider these 5 things when deciding when to refinance your car.
Refinancing Requirements
There is no minimum amount of time you must wait before refinancing. You are able to refinance at any time as long as you meet all the requirements for the new loan. In fact, if you find a better loan option, you might be able to refinance immediately after buying a new car. Each bank or lender will have their own refinancing requirements. Requirements typically involve the remaining balance on the current loan, age of the vehicle, and how many miles the vehicle has on it.
Interest Rates
Getting a lower interest rate will likely result in a lower monthly payment and could save you money on the life of the loan. If the interest rate you qualify for today is significantly lower than the rate on your current loan, it may be a good time to refinance your auto loan. If the rate you qualify for is the same or higher than the rate on your current loan, it might be best to wait for a better rate.
Credit Score
Your credit score is an important factor in determining the interest rate you’ll qualify for. Lenders will look to your credit score to determine whether you’re likely to make payments on time and pay off your debt. If your credit score has gone up, it’s likely that you could qualify for a better rate and save money on your monthly payments. Monitor your credit score so you know when you may qualify for lower rates.
Your Income
If you’ve had a loss of income, financing your auto loan to reduce your monthly payment may be in your best interest. A lower monthly car payment could relieve some of the financial strain caused by job loss or reduced income. Work with your bank or lender to determine if refinancing now will lower your current payment.
Remaining Time on Your Loan
Refinancing your auto loan may mean extending the term of your loan. If your biggest priority is lowering your current monthly payment, refinancing now may be the answer. It’s important to understand that extending the loan term likely means you’ll pay more over the life of the loan. If your ultimate goal is to spend the least amount of money, it may be in your best interest to hold off on refinancing.
When deciding whether or not to refinance your auto loan, it’s important to consider the timing. If your credit has improved, interest rates have gone down, and you could benefit from a lower monthly payment, it may be a good time to refinance. Before refinancing, be sure to fully consider your options and shop around for the best possible rate.
At Camino Federal Credit Union, we offer personal assistance and competitive interest rates. If you’re interested in refinancing your auto loan and want to know if now is the right time, one of our loan experts will be happy to assist you. Contact us at (800) 835-3400.