Refinancing your auto loan can lead to a lower monthly payment, a shorter term, or both! It depends on a wide range of factors, including the value of your vehicle, how much you owe on your current loan, and your credit standing. Read on to learn about three scenarios where refinancing makes sense for your car or truck:
1. Your credit improves
One of the biggest factors in determining your auto loan status is your credit score. When your lender is building a loan package, a credit report is pulled as a central part of that process. That number helps define your interest rate and what other fees your lender might charge. You can order a free copy of your credit report online, through annualcreditreport.com. That can let you see if your credit score has improved. It can take as little as nine months of steady repayment to boost your credit score, and that could result in a cheaper loan if you refinance.
2. You didn’t shop around before you borrowed
Many people feel overwhelmed throughout the car-buying process. They pick a car they like, then they are told what the price is, what the monthly payment is and everything else. It may seem like the choice of lenders for your car loan is predetermined.
Dealers tend to have a smaller range of lenders with whom they work exclusively. Those lenders know they have limited exposure to competition, so they can charge slightly higher fees and interest rates. By doing your own comparison shopping, you can save quite a bit on both the loan and any warranties you may have purchased. Dealer rates tend to be 1 to 1.5% higher than those offered at other lenders, like credit unions.
3. You need to change your monthly payment
You may be in a better financial situation now than when you bought your car. You may have a better job or more security. You may have paid off credit card or other debt. All of these things free up how much you can pay per month.
Most people don’t go into the refinancing process looking to increase their monthly payment, but you can save yourself money in the long term by committing to a faster repayment plan. If you can afford to pay more per month now, you can pay off the balance on your car faster. Shorter-term loans usually have lower interest rates, since the lender assumes less risk in making the loan. Once the car is paid off, you’ll have all that money to devote to other saving or spending priorities.
If you are interested in refinancing your current auto loan with SeaComm, give us a call at (800) 764-0566 or visit one of our seven branch locations. If you would like to apply for an auto loan, we have the best options to suit your financial needs. Click here to learn more!