When you’ve had a car for a long time, it’s almost expected that you’ll keep making the same payments you always did. Refinancing is a process that is usually associated with houses. However, refinancing your car could save you hundreds each month. It’s possible to refinance with the original loan provider but that doesn’t mean you can’t shop around before making that choice. It’s important to remember that refinancing, for homes or cars, isn’t for everyone. Before you actively seek this option, be sure to determine the value of your loan (how much you have left) and the value of your car. Here are six reasons why refinancing your car is a smart decision for you and your wallet.
1. The length of your loan is longer than five years
If your original loan is set to last longer than five years, chances are that you’ll actually be paying more interest than the principal. Refinancing may be able to reduce the length of your loan so that you pay a value closer to what you signed up for. And if it’s possible or helpful for your finances, you can refinance your loan for an even longer term to get lower payments.
2. Your credit score has risen
Depending on what your score was when you got the car, your interest terms may not have been the best. As with most credit-related purchases, a higher credit score will get you a better interest rate. This improvement could be the difference between a few hundreds of dollars each month. You can check your credit report before applying for the refinance to see whether it’ll be worth it or not.
3. Car interest rates have fallen
As with the economy, interest rates can get really high or really low. For this, timing will be important on when you choose to refinance. If you’re unsure of what the rates look like, you can research and get the information for your local area as well as cities nationwide. This will help your decision. You can also find out the current trends so you’ll know whether to wait a while longer or act immediately.
4. You didn’t get the lowest rate possible
Credit scores and ratings are not unchanging or permanent in any way. There are various factors that will determine whether or not your score will gain or lose points. Maybe your credit was shaky or new when you got the car. And if not that, it’s possible the economic conditions weren’t really favorable. Even worse, if you bought a new car and got talked into what sounded like a great deal by a talented salesperson, it’s worth looking into your loan terms. Time, interest rates and credit scores change. So that means you can also change the conditions of your loan to help get the most of your money.
5. You financed with the dealer where you bought the car
The rates being offered by dealers are typically higher so that they get a larger profit from each sale. So probably what they offered was a higher rate than what other lenders would give you for the same price and vehicle. If that’s the case, you can definitely seek other lenders to get a lower rate. Various banks and credit unions may offer lower rates. However, there might be a membership required before you can take advantage of their deals. Check with your own financial institution and see what they’re willing to offer you.
6. You need to lower your monthly payments
This is one of the most common reasons why it might be time to refinance your loan. Maybe your financial situation has changed for the worse and it’s just hard to keep paying for your car. Whether it’s an employment issue or the stress of additional bills, a refinanced loan may help your monthly costs. Financial institutions are great places to seek advice on how and where to cut costs and you might be driving one. If you need to rearrange your monthly payment plan without pushing your budget to the limits, refinancing your car might be one of your best options. By using this process, you be able to reduce some of your monthly financial pressures.
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