Refinancing your auto loan is an option for those who have better credit than they did when they were first approved for their auto loan. However, that's just the beginning; there are some other factors you should consider before you refinance.
- Have lending rates improved?
- Could you pay more per month?
- If you need to lower your monthly payment, is there anywhere else you could reduce your budget first?
Anytime you refinance your auto loan, you are making a new loan agreement – you are not renegotiating the terms with the original lender. What the new loan will do is pay off the remainder of your current one. Then you will make payments to your new lender.
Refinance When the Time Is Right
When you have spent the time rebuilding your credit, you should have the opportunity to reap the benefits of that hard work. In order for you to maximize that payoff, you should get quotes on the current interest rates and find out how much you can save by refinancing.
If the conditions are right, refinancing into a lower interest rate loan may be for you.
Some Alternatives to Refinancing
Sometimes we catch financial windfalls when we least expect it; it could come in the form of a higher paying new job, a raise at a current one, an inheritance or a tax return. In these cases, instead of refinancing, you could opt to pay off the loan sooner by making additional payments on the principal amount.
In case you didn't know, any additional money you put towards your monthly payments goes directly towards your principal amount. However, you will want to check your terms and conditions just to be sure there are no penalties for early repayment.
Refinancing to Lower Your Monthly Payment
Sometimes you just can't catch a break, and if you have already considered trimming your budget in other areas but still can't find relief, you could refinance in order to extend your loan term. This would stretch out your payments for a longer period of time, therefore reducing the month to month burden. However, this is one option to be careful of as you run the risk of owing more than the car is worth. This is also known as being underwater on your loan.
As We See It
The timing and circumstances are huge factors when considering a refinance. You should carefully weigh the benefits and drawbacks before you begin the process; keep in mind that every inquiry into your credit affects your rating, so you want to be as informed as possible.
If you are looking for ways to rebuild your credit and are in need of reliable transportation, Auto Credit Express has a nationwide network of car dealerships, and we are ready to connect you with the nearest dealership that can help. Complete our fast and easy online application today.