Refinancing an Auto Loan
When you get your auto loan, your main goal is likely to pay it off as fast as possible. While that is a great goal to have, many people lose sight of other options there are with the loan. In fact, you can refinance in hopes of making your interest rate more affordable which overall lowers your monthly payment. However, refinancing may not be an option for everyone, so it is important to know a few things before you submit an application.
What should you know before refinancing?
The best way to know if you should refinance is by looking at your credit score. If you believe that your score has improved over the months after you initially got the loan, then you should confirm that! There are ways to check your credit score for free by using applications like Credit Karma that allow you to see your score without hurting your credit. You should also keep in mind that even if your credit score may take a little hit from the actual hard inquiry of submitting the refinance application, it is typically beneficial overall. A majority of car loans do not have penalties for early repayment, and it is free to refinance so you do not face many risks!
When should a person refinance?
Many people like the idea of refinancing because you end up paying less interest overall, have lower monthly payments, and take charge of your finances. This is especially helpful for people who are rapidly growing their credit which means if they started with a very high interest rate due to low credit, they could now save a significant amount after refinancing. An example of this is if a person originally had an interest rate of 18% but after 6 months, and refinancing then they were able to get their interest rate to 12%. While not every refinance is the same and some may save more than others, you can still save hundreds or even thousands over the length of your loan. Once you have a lower car payment, you can take that money and put it towards other important aspects like savings, paying off other debts, and more!
You should especially look into refinancing when you notice that interest rates drop. Interest rates can lower for many reasons like a change in the economy, increase in competition, and more! You can find yourself saving additional money on the interest if you refinance at a good time.
Many people do not realize the benefits to refinancing a vehicle. However, if you feel like your credit has improved then you should be able to submit a free application in order to lower your payments. You also may be able to look at different lenders that provide more flexibility with repayment options or even loan length to overall make your monthly payments more manageable. If you are still cautious to refinance because of your credit, then you can speak to a free consultant and ask them what they feel would be best given your financial situation!