You always hear about people refinancing their mortgages, but what about refinancing an auto loan? There are several reasons you may want to refinance your auto loan, and a couple of reasons you might not. Read on to see what best describes your auto loan situation to decide if you should refinance your car.
Why You Should Refinance Your Auto Loan
Everybody’s financial situation is different. Here are a few reasons why you should refinance your car:
- Better Interest Rates
Whether interest rates are down overall, or you’ve found a better rate than what you currently have, a lower rate is a good reason to refinance your auto loan. Credit unions like WWFCU typically have lower loan rates than most banks and auto dealerships – take a look at our auto rates here.
Keep in mind that there are minor costs to refinancing and you may want to check the terms of your current loan before you switch.
- Improved Credit Score
If you find yourself in a better financial situation than when you first bought your vehicle, you may want to think about refinancing. A better credit score means a lower interest rate. You can get your credit score for free on websites like com and creditkarma.com.
- Lower Monthly Payments
If money is tight, reducing your monthly payments could give you some financial breathing room. Check out our loan calculator using the new loan terms to see if refinancing makes sense. Sometimes stretching the term out an extra year and nailing down lower rates can make a big difference in your monthly payments.
- Buying the Car You’re Leasing
As the end of your lease approaches, you’re given the option to purchase your vehicle. You can either buy it outright or refinance it. Do the math to see if refinancing makes sense for you vs. extending the lease or leasing/buying a new car.
When You Shouldn’t Refinance Your Auto Loan
- You’re Close to the End of Your Loan
Thanks to the amortization process, you pay less in interest during the life of your loan. Because of this, it makes more sense to refinance closer to the beginning of your loan when you’re paying more in interest.
- Vehicle Depreciation
If you have an older model car and/or have high mileage, you probably won’t want to refinance. Many lenders don’t want to lend money on a vehicle that has greatly depreciated in value.
- You’re Underwater on Your Current Loan
If you owe more than the car is worth, lenders won’t want to refinance it. Check your vehicle’s value before you start the refinance process.
Whether you need help deciding if refinancing is right for you or you already know it’s time to dive in and refinance, WWFCU can help. Speak to a Member Service Representative at (734) 721-5700 or in our lobby to learn more.