There are several reasons that make sense to refinance your auto loan. Maybe you initially got a bad rate because you just graduated from college and didn’t have a credit history. Or maybe the initial term on the note was quite long, and your car has aged.
Perhaps interest rates have dropped since you bought your vehicle. Or your finances and credit rating have improved. Depending on your situation, it could make sense for you to refinance your car or truck if some of these conditions apply.
A Lower Interest Rate
If you originally bought your car through a dealership and took their financing, then that was convenient but probably got you stuck with a higher interest rate. Or maybe you got a loan through your bank, but now interest rates have gone down. Even if these factors don’t apply to you, if your financial credit rating has greatly improved since you got your loan, it might be worth it to see what kind of savings you’ll get if you refinance your loan.
Your Credit Score Has Gone Up
Maybe you bought your car right after you graduated, or maybe you had some rough financial times but have since improved your credit rating.
If your credit score has gone up since you took out your auto loan, then refinancing may end up saving you a lot of money as banks and other financial institutions evaluate your score to determine the level of risk they are taking when they loan you money. The higher your score, the lower your risk, which leads to better interest rates for your loan.
Lower Monthly Payments
Switching to a lower interest rate can lower your monthly payment. So can increasing the period over which you pay off your loan. There are downsides to this strategy, of course. Lengthening the term of your note may increase the overall amount you pay even though your interest rate may be less. However, if this is the only way you can continue to make payments, this is an option worth considering.
It may make sense to refinance your vehicle, but you need to do some research. You’ll want to find competitive interest rates but also take into account the fees you’ll have to pay to make the transaction. You’ll also want to consider the accumulation of interest over the life of the new loan.
The options that you may want to consider if you’re currently using dealership financing:
• Your local credit union: Often, these institutions offer the best rates
• Your bank: This might be the most convenient option
• Institutions found online: The internet allows you to find other banks and institutions that may give you better rates
One tool that can help you figure out which of your options is the best is the car loan refinance calculator you can find on Lantern by SoFi. According to the experts at Lantern by SoFi, “Refinancing your car loan can lower your interest rate and save you hundreds and even thousands of dollars over the term of your loan.” They are an online marketplace that provides information about many types of loans, from those for small businesses to personal loans. It is a great resource that connects business owners and others with lenders.