You may have heard the term “refinancing” thrown around here and there in the car buying world. What does it mean to refinance, and when is the best time to refinance your car?
When you refinance a car loan, you’re essentially replacing your old loan with a new one – usually with better terms. In order to refinance, you’ll need a lender that’s willing to work with you. Once you find one, you’ll need to determine what your goal is. Each refinancing outcome is different, depending on if buyers wish to lower their monthly payment, reduce their interest rate, or extend the length of their loan.
When to Refinance, and When Not To
In order to get the best deal, you’ll need to know the best and worst times to refinance. The best time is when your credit has improved. This is especially true if you took out a bad credit car loan, as you may be able to refinance and get a better interest rate. This can lead to a lower monthly payment and reduce the amount of interest you pay over the term of your new loan.
If you changed jobs or your financial status has changed (either for better or worse), refinancing can help you out. Because you’re taking out a new car loan, you can change the loan’s terms to fit your current financial situation. For instance, you can extend the loan term to get a lower monthly payment and free up money in your budget.
On the flip side, refinancing isn’t for everyone. If the car you have is older, make sure you don’t wait too long to refinance. Many lenders aren’t willing to refinance cars that are over a certain age and mileage, although the specifics vary.
Even if your car isn’t very old, there are other circumstances that’ll prevent you from getting approved for refinancing. One of these is being upside down on your current loan, as most lenders won’t refinance a vehicle with negative equity.
The Bottom Line
Refinancing an auto loan is a great option for buyers looking for a better interest rate or a lower payment. The biggest challenge buyers face is picking the right time to refinance. If you’re looking improve your situation, you won’t be able to refinance right away after taking out a car loan, but waiting too long can cost you, as well.
At the same time, if you need a car loan but have bad credit and don’t know where to turn, let Auto Credit Express help. With a nationwide network of special finance dealerships behind us, we want to connect you to a local dealership that can tackle challenging credit situations. Get started today by filling out our auto loan request form.