You may have loved or resent the car-buying process. However, now you can be the proud owner of a new car payment. Change is inevitable in all aspects of life. This means that you may consider refinancing to get more mileage from the money you have.
What does refinancing mean? No problem! Refinance is the process of taking out a car loan to pay off an existing one. Typically, you will receive a lower interest rate or a smaller monthly payment. In other words: you are searching for an interest that is more appealing to you and suits your current financial situation.
Whether you are considering auto refinancing, there are some things to think about.
1. Reducing Your Interest Rate
Interest rates can fluctuate frequently so there’s a possibility that rates may have dropped since your original auto loan was taken out. Even a slight drop in rates can make a huge impact on the loan’s lifetime. This is why it is so important to check your current rate as well as the current loan rates. Keep in mind, the interest rate you get is determined by your credit score. So make sure you understand what a credit score looks like.
2. Get A Lower Monthly Payment
Refinancing could be the right choice for you if your primary concern is reducing monthly payments and not worrying about the term of your auto loan. If you’re looking to reduce your monthly payments, you can choose a longer term for refinance. Paying your loan off for a longer duration will usually result in a lower monthly installment.
3. Your Monthly Payment Can Be Increased
Wait, what? Yes, you did read it correctly. If your financial circumstances have changed in a significant way and you have more monthly money, you might consider refinancing your vehicle loan for a shorter duration. The higher your current car loan term, the more you will have to pay in interest. If you can pay more every month, you can reduce the loan’s term length and pay less interest.
4. Add Policies To Your Loan
Based on your experience buying a car you might not have been aware of the additional policies you can add to your car loan. GAP insurance covers the difference between what is owed to the vehicle’s actual car value and what is owed if the vehicle is stolen, damaged, or lost. Talk to your lender to find out what options are available.
5. It Would Be Nice To Own A House
Be more than just a car owner. When you buy a car from a dealership, either you opted for a loan through them or they did some shopping around and you now have an auto loan through a bank. Banks are for-profit and loans made directly by dealers can sometimes be lower than the going rates. Credit unions generally offer lower rates, as they are owned solely by their members. Credit unions receive higher interest rates for loans and higher yields from savings accounts. Other benefits include loan discounts, personalized banking experiences, and better loan rates.