Refinancing your vehicle means taking on a new loan to pay off the balance on your existing auto loan, which can lead to significant savings in the long run.
Here at Carolinas Telco Federal Credit Union (CTFCU), we aim to empower members with the knowledge they need to make intelligent decisions that enhance their financial well-being. Keep reading to learn more about refinancing auto loans and if this option makes sense for your specific situation.
When and Why You Need to Refinance Your Auto Loan
A simple Google search for the key phrase “refinancing my auto loan” will return dozens of results, some more accurate than others. To take the guesswork out of researching, we’ve compiled some reasons why you might want to consider refinancing:
- You want to lower your monthly payments or your interest rate. If you want to have more wiggle room in your budget for other essential expenses, refinancing for a longer-term can help you keep some extra cash in your pocket. However, make sure to increase your monthly payment as soon as you can afford it to avoid continuing to pay long after your car depreciates (lost its value).
- Your credit score has improved since you bought your car. This, along with on-time car payments, might make you eligible for a better rate and allow for interest savings over the loan term.
- Interest rates have gone down. Numerous factors cause car loan interest rates to fluctuate. If rates have decreased since you purchased the car, you might be able to get a better financial deal.
- You want to pay your loan off faster. Did you receive an unexpected lump sum of money from a promotion at work or other windfall? Put it to good use by paying off your car before the end of the loan term. This will also allow you to pay less interest.
- You’ve found better offers. Refinancing might work for you even if you don’t check off any of the above boxes. Being unhappy with your current lender or interest rate is enough reason to shop around.
If you took out your loan through a dealer and weren’t allowed to negotiate the interest rate, consider looking into a trustworthy credit union that offers generous members discounts.
How Soon Can You Refinance an Auto Loan?
Unless otherwise stated in your agreement, you can move your loan to another lender at any time. Borrowers with limited credit history should consider waiting at least a year before refinancing to allow for positive payments to be reflected on their credit reports.
It’s worth mentioning that high mileage auto refinance can bring additional considerations. Buyers of this vehicle type should weigh their expected annual miles driven against the expected loan payoff date. To make an approval decision, lenders will review your creditworthiness, debts, condition of the vehicle, and mileage among other factors.
Refinancing Auto Loans With CTFCU
If you’re looking to purchase or refinance, consider financing your auto loan with Carolinas Telco Federal Credit Union (CTFCU). We offer the same rates on new and used vehicles (less than 8 model years and 100,000 miles) and options for extended age and mileage autos. If you need more information, we have written a comprehensive article to help you understand the process.