Why You Should Consider Auto Loan Refinancing

Car payments can be a real nightmare, but car loan refinancing can help! If you need to save money, free up cash for an emergency expense, or have a sudden drop in income, lowering your monthly auto loan payment can help you tap into the extra funds you need.

If your credit score has improved since you first took out your car loan, you may be eligible for a lower interest rate. Even if you cannot lower your interest rate, you may be able to free up money with a lower car payment.

Refinance Your Auto Loan When Rates Change

Interest rates change regularly, so there is a good chance that the rates have lowered since you first financed your car loan. A drop of 1-2 percentage points could result in lower monthly payments and less interest paid over the life of your loan.

If rates have dropped since you purchased your vehicle, it may be a good time to refinance a car loan. Even a small difference in your rate could help you lower car payment costs each month and save you money over time.

Refinance A Car Loan When Your Finances Change

Your current financial situation may look very different from when you originally financed your vehicle. Choosing to refinance your auto loan gives you the opportunity to see whether you now qualify for better loan terms.

Lenders use several different factors when determining whether a person is the right candidate for a loan. A financial institution’s two most common considerations when approving a loan are credit score and debt-to-income (DTI) ratio.

If you have improved your credit score and decreased your DTI ratio, think about auto loan refinancing. You could qualify for a lower rate!

Lower Your Car Payment to Free Up Cash

If you need some extra cash, refinancing to a lower interest rate can lower your payments. Even if you can’t lower your interest rate, you may be able to refinance a car loan over a more extended period. While you’ll pay more interest overall, a lower monthly payment will give you the cash needed.

If your original loan amount was $25,000 with an interest rate of 7% and a term of 60 months, you would end up paying $495.03 per month. After making payments for one year, your new balance would be $20,672.55.

Refinancing the $20,672.55 balance at a lower interest rate of 5% and choosing the same 60-month term, your new payment would be $390.12 a month, putting $104.91 back into your monthly budget. This example shows how you could potentially lower car payment expenses and leave more room in your monthly budget.

Is Auto Loan Refinancing Right for You?

While car loan refinancing can sometimes save you money, you should consider whether it meets your needs. Your interest rate, remaining balance, loan term, and monthly budget can all play a role in deciding whether to refinance a car loan.

If it sounds right for you, now is a great time to get started. This October, FFCCU will help you refinance your auto loan from another lender to get a better rate. And with no payments for the first 90 days, you can carve out some serious savings.

Check out the promotion here! Or apply for a loan today!