Let’s talk about one of the most important purchases you’ve made — your vehicle. It gets you to work every day and is your designated road trip buddy, not to mention all the little errands it helps you cross off your to-do list. There’s just one catch. That new or new-to-you car came with a hefty monthly payment.
The good news? You’ve got options when it comes to how you pay back your auto loan, and refinancing your car is one of them. Here are four reasons why you might consider refinancing your auto loan today.
Your Credit Has Improved
A high interest rate on your car loan can cost you hundreds if not thousands of dollars over the life of your loan. If when you bought your car your credit score was not in the best standing, your lender might have offered you a higher rate in order to protect their investment in you as a customer. But if you’ve been making your payments on time, whittling down your debt and showing your trustworthiness as a borrower, there’s a good chance your credit score has improved since then!
In almost all cases, the better your credit score, the better interest rate you’ll qualify for on your loan. That means you can refinance your auto loan to secure a lower rate than the one you started with and save money as you pay that loan back. Not only will you save over time by paying less interest on your loan overall, but you might also see a drop in your monthly payments. It’s a win-win!
You Want to Lower Your Monthly Payments
Car loan interest rates aren’t always the same. Rates may go up or down depending on the overall market and other financial factors. If rates were high when you purchased your vehicle, you were locked into that rate with your loan. If rates have dropped since then, refinancing your car lets you lower your rate to what is currently being offered. Lower rates mean paying less interest and can also save you money on your payments every month.
Locking in a lower interest rate is just one way to save money by refinancing your auto loan. If your monthly payments are no longer manageable for your budget, refinancing to a longer-term loan may be an option for you.
Let’s say your original car loan was for $20,000 over 48 months with an interest rate of 3.11%. That would make your monthly payments $444. If you had $15,000 left of your loan after making payments for some time and were to refinance at the same rate for another 48-month term, your payments would go down to $332.74. That’s over $100 a month in savings! And that’s just the beginning. You may be able to get a lower interest rate on your refinance or stretch your repayment period over 60 months for even more savings.
You Want to Pay Your Car Off Faster
Paying less on your car loan every month is just one of the perks of refinancing. Refinancing to a lower rate AND a shorter term means you can pay your car off faster while saving yourself some money on interest.
In some cases, like if your current interest rate is very high, refinancing to a shorter term with a lower rate will save you money on your monthly payments while helping you pay your car off faster. However, in many cases, refinancing to a shorter term may slightly increase your payments. If your goal is to get rid of your debt, this is not a bad thing! Paying more every month means you’ll pay your loan off faster and get closer to your financial goals, especially if that goal is to be debt free. If your budget allows you to make those slightly higher payments, you’ll keep more money in your pocket in the long run.
You Qualify for a Special Offer
Banks and credit union often run special promotions for car loan refinancing. If you’re in the market to change up your loan, shopping around for these offers can bring you the most savings.
Whether it’s receiving a gift card with your approved application, a rebate for bringing an existing loan to your new lender, or no payments for 60 or 90 days with a new refinance, you’ll have to weigh out which offer suits your needs and your budget best. From there, taking advantage of the special promotions is as simple as filling out an application online!
Take a peek at FCU's special offers here.
When NOT to Refinance Your Car
Refinancing your auto loan is a money-saving option for many car owners, but there are circumstances when refinancing is not a wise move, including:
- If you owe more on your existing car loan than your car is currently worth (also known as being “upside-down” in your loan)
- If you’re close to paying off your existing loan
- If there pre-payment penalties on your existing loan and you would have to pay significant fees to refinance with a different lender
How to Refinance Your Car Loan Today
With all the best car refinancing offers right at your fingertips, it’s never been easier to refinance your vehicle. Take Florida Credit Union as an example. You can start your refinance process online with a few clicks or taps, by giving us a call at (800) 284-1144, or by visiting any of our branches.
Florida Credit Union is a full-service financial institution. Founded in 1954 as the Alachua County Teachers’ Credit Union, FCU now services nearly 130,000 members in 48 counties throughout North and Central Florida. For more information on the services we provide, visit FLCU.org or call us at 1-800-284-1144.