5 Instances When It May Be Wise to Refinance Your Auto Loan
By: Aly Hess
Posted on Monday, October 3, 2016
While it may take some time and effort to refinance your mortgage or consolidate your debt, refinancing an auto loan is typically a quick and painless process - and, though it may not be the right decision for everyone, it can benefit those who find themselves in one or more of the following situations.
1. Interest rates have dropped.
While one or two percentage points may not seem like a huge difference, over the life of a loan, they can really add up. If interest rates have dropped since you purchased your vehicle, you could save some money by refinancing.
- Check out our Auto Loan Comparison Calculator!
2. Your credit score has improved.
Been working to improve your credit score and build your credit history since purchasing your vehicle? A higher score could work in your favor now, as credit scores have a major impact on auto rates. Check your credit score and, if it's improved, take action to see if you qualify to refinance at a lower rate.
3. You didn't get the best rate when you purchased.
You may have thought you were getting a great deal when you purchased your vehicle months or years ago, but if you didn't do your research, you may have missed out on more affordable opportunities. This especially rings true if you financed at the dealer. Consider doing your research now to see if you can find, and qualify for, an even better deal.
4. You've experienced a financial setback.
If you've had some unexpected expenses fall onto your plate that have caused you to rework your budget and find ways to cut costs, refinancing your auto loan might be a solution, as it may allow you to increase the term of the loan and lower your monthly payment.
5. Your lease is about to expire and you wish to buy the vehicle.
If you've fulfilled the terms of your lease and have the option to purchase the vehicle, you'll want to consider refinancing your loan.
How much might you save by refinancing?
According to Bankrate:
"[If] one year ago you took a $25,000 auto loan for five years at 7.75% interest, refinancing the balance today at:
- 4.75% for the remaining four years of the loan would save $1,373 -- $28.60 per month.
- 5.75% for the remaining four years of the loan would save $906 -- $18.88 a month.
- 6.75% for the remaining four years of the loan would save $448 -- $9.33 a month."
While it may not seem like much, even saving the $9.33 per month would mean over $100 extra in your pocket over the course of a year!
Is refinancing right for you?
It's important to note that not everyone qualifies for a refinance. For example, you're less likely to be approved if the vehicle is worth less than the loan balance, the vehicle is older than a lender's "cut off" age, or the amount to be financed falls outside of the lender's dollar range for their refinancing product.
However, that doesn't mean you shouldn't at least look into the possibility of refinancing your auto loan. At 3Rivers, we're always happy to sit down and discuss your options to help you make the right decision for your current financial situation and your future money goals.
How can you get started?
Check out our Vehicle Loans page for current rates and details, and to learn more about the potential added benefit of cash back should you decide to refinance with 3Rivers!
All credit to the information in this post goes to this Bankrate article.