Should you refinance your auto loan? This depends on whether or not refinancing will save you money or improve your current situation in some way. If you qualify for a new loan, the refinancing process is actually pretty simple. And, in most cases, you can even apply online.
Of course, you first need to determine that getting a new loan with different terms is the best move for you right now.
Situations Where it Would Make Sense to Refinance a Car Loan
Even though refinancing a loan usually involves a simple process, it still takes time and effort. So, before seeking out a refinancing opportunity, you'll want to make sure that the timing is just right. With this in mind, there are a few scenarios where auto loan refinancing makes sense for a lot of consumers.
Your Credit Score Has Gone Up
If you've been making your car payments on time for 12 to 18 months, there's a good chance that your credit rating has improved. This is especially true if you started with bad credit and have been making efforts to raise your score.
With an improved credit rating, you may qualify for an interest rate that is several points lower than the one you have now. So, depending on where you are in your loan, you could save thousands of dollars in interest charges after refinancing.
You were Assigned an Unfair Interest Rate
If you assumed that your credit was bad but failed to check your credit score before buying a car, you may have accepted a higher-than-necessary interest rate. This is why it's so important for buyers with credit issues to check their credit first. Because, even if you know your interest rate will be higher than average, you'll want to be sure that you get the best rate possible.
Therefore, if you discover that your credit isn't as bad as you thought it was, and that your interest rate is too high, you should probably refinance your loan. Just take the time to do a little research before applying in order to confirm that your suspicions are correct.
The Prime Interest Rate has Dropped
All interest rates are based on the prime rate, and this number can fluctuate. So, traditionally, car buyers should keep an eye on the prime rate. And if it has dropped by a lot, they might choose to refinance. Of course, right now it doesn't look like the prime rate is likely to fall anytime soon. In fact, it is expected to climb in the near feature.
Knowing this, if you're on the fence about refinancing, now may be a good time to act. Or, at the same time, if you need to finance a vehicle purchase, getting an auto loan now as instead of later could be a wise decision.
You Car Payments are Too Expensive
This is probably the "worst" reason to refinance, but maybe the most necessary for some consumers. Here, you probably won't be refinancing to get a better rate, but to extend the loan term and lower your monthly car payments.
In the long run, doing this will be more expense because you'll end up paying more in interest charges. However, if you're at risk of missing a payment, or, worse, losing your car to repossession, refinancing is a much better option. It may cost you more down the road, but at least your credit will be protected.
Easier Auto Financing for Car Buyers with Bad Credit
If you need to purchase a car, but are worried that your bad credit will make the process harder, Auto Credit Express can help. We can match you with a local dealer that can work with unique credit situations.
There is no charge for this service, and contacting us places you under no obligation to buy anything. So, you have nothing to lose except another day without a car. Go ahead and fill out our simple and secure online auto loan request to get started today.