Depending on your credit score, you may be one of the tens of millions of Americans every year that could benefit from refinancing their auto loan. The reasons you may have for doing so can vary widely; the process, however, is the same.
The first thing you may want to know is how soon you can refinance a car loan. This depends on a variety of factors; but generally, you can refinance as soon as you want, assuming your lender allows it. Many experts agree that waiting for interest rates to dip is a good time to start thinking about it unless more pressing matters necessitate an early refinance.
If Personal Finance Takes a Dip, then Refinance
By easing the burden of high monthly payments, you’re extending the length of the loan term and increasing the total amount of money you’re on track to pay. If you’ve hit a financial snag in your personal life, this may be an acceptable risk. Besides – there’s still the possibility of refinancing again to elevate your monthly payments back to their prior levels and get back on a less costly track overall.
When There’s a Big Improvement in Your Credit Score
In fact; the improvement doesn’t even have to be a big one, insofar as points are concerned. If you were a subprime borrower and had bad credit previously, but on-time credit card payments and consistent loan payments have raised you to the near-prime line, then refinancing could make economic sense. You’d be eligible for a more favorable rate from auto lenders that could reduce your overall costs by thousands of dollars over the lifetime of the loan.
Interest Rates Have Dropped
This happens on a national scale, and if the amount by which they’ve decreased beats out the nominal fee for refinancing, then it could be a great idea. Just keep in mind that the refinance rates are higher than for new car rates; there are online auto loan rate calculators that take out the guess work, though.
Sometimes, people who want to refinance learn only then that their bank doesn’t offer this service. In this case, you may have to take your loan terms to a place that’s more favorable to this option – such as a credit union or community bank. This often necessitates opening up a new account with them; but it could be worth the trouble if you’re going to save a bundle over the lifetime of the auto loan.
Another potential road bump is if there are prepayment penalties. When taken into account, these may drastically reduce the benefit of a refinance – which is, after all, the same thing as obtaining a used car loan since your car is no longer considered new. Again; this is another benefit of having an online auto loan calculator at your fingertips via browser.
Talk with your lender; if you have a great track record with them (but a relatively poor credit history), they could be open to refinancing your current loan. Of course, you would have to have paid all of the monthly payments to date on time; otherwise your leverage is non-existent. Depending on the bank/lender, you could have an answer in just a day or two.