How does it work to refinance a car loan? Is it worth it?
If you already have an auto loan and want to lower your monthly payments, you’ve probably asked yourself these questions. Refinancing your auto loan could save money, and the process is pretty simple.
When you refinance your car, you replace your current auto loan with a new one. The new loan pays off your original loan, and then you begin making payments on the new loan.
Whether or not you choose to refinance your current car loan depends on your personal financial situation and goals. Refinancing may help you save money by lowering your monthly payments or reducing the amount you pay in interest.
Here are five key questions to consider before you decide to refinance your current car loan:
Late payments on your existing loan could make it difficult to qualify for a new loan with better terms. Catch up on your payments first, then look at your options for refinancing.
Paying a fee to pay off your current loan could cancel out the savings you might gain from refinancing. Take a close look at your current loan and understand any penalties you might incur for early payoff.
If you owe more than your car is worth, you could have trouble getting a loan with a better term. It might make more sense to create a budget and build a plan for paying off your current loan.
Some lenders won’t refinance older vehicles or cars with high mileage. If you’re driving an older car, you might be better off saving to upgrade your vehicle.
Lenders rely on your credit score to approve a loan and determine your interest rate. If your credit score has improved, it could help you get a loan with better terms. If you have a low credit score or damaged credit, you might want to avoid the hard pull on your credit report that applying for a new loan would create.
You might want to think about refinancing your auto loan if:
If your credit has improved since you originally got your auto loan, you may be able to get a new loan with a better interest rate and more favorable terms.
If today’s interest rates are lower than when you originally got your car loan, now might be a good time to refinance. Our free online Car Payment Calculator can help you see how interest rates will affect your monthly payment and the total amount you’ll pay in interest.
You might not have gotten the best loan terms if you got your auto loan from the dealership where you bought your car. Now you can do more research and shop for lower rates.
Refinancing your car loan with a lower interest rate or a longer term can help you reduce your monthly payments. Just remember that a longer term will increase the interest you’ll pay over the life of the loan, which could eat into your overall savings.
Marine Credit Union can help you find the right auto loan to reach your goals. Keep your loan in the community. Get in touch with a Marine Credit Union lender today.
Different goals call for different types of loans. When you’re looking for a car loan, we’ll find the right solution to meet your unique needs.
We don’t think anything should stand in the way of your dreams of ownership. If you’re ready to purchase a car, we’re ready to discover a way to make it possible.
Some lenders have rigid lending guidelines and qualifications that are tough to meet. If you’ve been told “no,” we can help you find the path to “yes.”
All loans subject to Marine’s approval process. Membership eligibility required. Federally insured by NCUA. Equal Housing Lender.