Once you’ve secured your financing and purchased your vehicle, it might seem like the best thing to do is just keep making the payments until you’re done. In some cases, this is a fine idea. In others, however, refinancing could save you hundreds or thousands of dollars.
If you’re not sure whether it could help you save, we gathered the five signs to look out for:
1. Interest Rates Are Consistently Low
Over the past several years, interest rates have been at historic lows and there’s evidence to indicate they’ll stay that way for a while. If you bought your vehicle when rates were high, it may be time to look for a new loan. If you find a rate that’s lower than your current rate, you’re probably in a good position to save money.
2. You’re Making More Money Than You Were Before
When your income increases or becomes more stable, lenders are more interested in approving a refinance application. Refinancing to a shorter term with higher payments could help you pay your car off sooner. Plus, it will also reduce the amount of interest you pay in the long run (win-win!).
3. Your Credit Score Improves
If you’ve been working to improve your credit, you may be a stronger candidate for a loan than you were when you originally financed your car. When lenders perceive that loaning you money is less risky, they’re more willing to work with you. Just make sure that in addition to a good credit score you also have a steady income and stable job situation to go with it.
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4. You Can’t Afford Your Current Payments
No matter how well your financial situation may look when you purchase a car, financial setbacks can happen to anyone. If you suffer a loss of income or another financial hardship, you may be able to improve your situation by refinancing to a lower monthly payment. You can do that by finding a lower interest rate, but if you’re struggling financially, this might be difficult to accomplish.
Your other option is to extend the term of your loan, giving you more time to pay off your loan. Once your situation improves, you may be able to pay extra on your principal each month in order to repay your loan sooner and reduce the amount of interest you pay for your vehicle.
5. You Find a Better Deal Available at Another Lender
Rate shopping can be very effective, as long as you’re not nearing the end of your loan. If you find a lower rate than what you currently have, refinancing could help you save money in the long run. Right now, we’re offering refinancing rates as low as 3.24% APR1.
Now that you know all the reasons refinancing your auto loan might be a good idea, it’s time to take a look at the details.