4 Benefits of Refinancing a Car Loan
Does refinancing your car loan make sense for you? Refinancing an auto loan means paying off an existing loan from one lender with funds from a different lender. Here are a few things to consider when deciding if an auto loan refinance is right for you.
1) You can get a better rate
Loan rates have decreased since you bought your car, to the point where it may make sense to refinance so you pay less interest. Or maybe you chose dealer financing when you purchased your car, which might not have been the lowest rate. Also, if your credit score has increased since you purchased your car, you might currently qualify for a lower rate.
2) You can financially handle a larger payment
If you bought your car a few years ago, you may have opted for a longer term such as 72 or 84 months. A shorter-term means a larger monthly payment, but it also means a lower rate and less interest paid over the length of the loan. If your paychecks have increased over the last few years, it may make it easier to afford those higher payments.
3) You need a smaller payment because you are buying a house
If you are considering buying a house, it might make sense to refinance to a longer-term to reduce your current auto loan payment. This will reduce your monthly debt obligations, to help you qualify for a home loan.
4) You can make bi-weekly payments
If your payroll comes bi-weekly, making an auto loan payment every time you are paid can definitely save on the overall interest you pay, plus you can pay the loan off sooner. With bi-weekly payments, you make 13 payments a year instead of the usual 12 payments. If you have an auto loan at Heritage Credit Union, it’s easy to set up these payments automatically with transfers from wherever you bank.
The bottom line is you can often save money on interest or pay your auto loan off sooner with an auto loan refinance, and that can improve your financial situation.