Are your car payments too high? Are you struggling with a ridiculous interest rate? Do you need access to cash for other things? If you’re answering yes to any of these questions, and you’ve been wondering: when should you refinance your car, the answer might be now.
in any of these cases, refinancing your vehicle could provide solutions. Refinancing is a process that simply renegotiates your loan terms to try to improve the interest rates, change the monthly payments, or expand the loan by cashing out some of your equity in the vehicle.
Read on to learn more about how all of this works, when should you refinance your car, what the benefits can be, and more.
Why You Should Consider Refinancing
When you refinance an auto loan, you replace your existing loan with a new one. Typically, the new loan includes the entire value of your remaining balance. Sometimes, additional money is included in the process (giving you cash now that’s paid back through the life of the loan).
This process completely erases your existing auto loan, so you don’t have to worry if it has high-interest rates or unfavorable payment terms. Only the new, refinanced loan matters once the paperwork is processed. This way, you can simplify your finances and maybe save money with a better auto loan.
When Does Refinancing Make Sense
Refinancing a car loan can potentially help you improve your finances. That’s the primary reason to do it. The advantages of refinancing can include a lower interest rate on your loan or lower monthly payments that are easier to manage.
So, should you refinance your car? The following considerations can help you decide:
- Interest Rates – It’s possible to get a lower interest rate when you refinance. This happens if interest rates go down, so it’s worth watching federal interest rates to time a refinance.
- High Interest Rate from Dealer – Dealerships offer financing options onsite, making it easier to get a loan. but, they also frequently receive kickbacks from these loans, leading to higher average interest rates. Refinancing directly with a lender can sometimes lower interest rates.
- Improved Credit – Most times, people get a new vehicle when they need it, regardless of their financial situation. Suppose your credit score has improved considerably since you signed for your auto loan. In that case, refinancing could lower your interest rate (and thus, monthly payment) by a lot.
- Monthly Payments Are Too Much – You can use a refinance to restructure a loan. Doing this can help you lower the monthly payments without risking repossession. It can be an excellent option if you’re facing financial struggles and need a loan you can afford.
Benefits of Refinancing Your Car Loan
Refinancing is intended as a tool that helps your financial situation. It works by lowering how much you owe on a loan, reducing your monthly payments, or giving you access to needed cash.
- Reduced Interest Rates – Interest rates could go down, your credit score might have improved, or maybe you found a better lending option. In any case, if the interest rates on your refinance are lower, you’ll save a lot of money over the life of the loan.
- Lower Monthly Payment – There are two ways that refinancing can lower your monthly payments. If the interest rate goes down by enough, the loan amount will drop as well, allowing you to take on a lower monthly payment. Otherwise, you can extend the loan term to get your monthly payment down.
- Access to Extra Money – Sometimes, cars go up in value. When that happens, you can do a cash-out refinance where you take a loan for the value you own in the vehicle, giving you access to cash.
Final Thoughts
Refinancing isn’t a silver bullet that magically solves all financial problems. But in the right scenario, it can provide needed help or extra breathing room.
Whether you’re hoping to lower interest rates, adjust your monthly payments, or get cash for your vehicle’s equity, answering the question: should you refinance your car is easier when you’re informed. Refinancing can help you manage your finances and reach a better general financial state.
HFS FCU Auto Loan Refinancing
Refinancing isn’t always the right choice, but there are times it can make a world of a difference. If you’re looking for the best credit union to refinance your auto loan, look no further. Explore your options by contacting HFS FCU today.
You can speak with one of our experts about the benefits we offer on refinance car loans. We’ll ensure you fully understand your options before committing to anything. You can also check out our Auto Loan page for more information.
