Why You Should Consider Refinancing Your Car Loan
Car payments can be a real nightmare – refinancing your auto loan can help. If you need to save money, free up cash for an emergency expense, or have 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. But, even if you cannot lower your interest rate, you may be able to free up money by reducing your monthly payment.
Interest Rates Have Changed
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..
Your Financial Situation Has Changed
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 debt-to-income (DTI) ratio.
If you have improved your credit score and decreased your DTI ratio, think about refinancing your car loan. You could qualify for a lower rate!
You Need Extra 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 your 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.
While refinancing your car loan can sometimes save you money, you should consider whether it meets your needs. If it sounds right for you, now is a great time to get started. This October, FFCCU will help you refinance your existing outside auto loan 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!
