The refinancing process can lower your monthly payments and help you get out of debt faster. The answer to the question "should I refinance my car now?" depends on your situation, but if you're thinking about it, here are some things to consider:
- Is your auto loan term nearing its end?
- Are you struggling with high monthly payments?
- Have interest rates gone down?
- Has your credit score gone up?
- Do you want a lower interest rate?
If the answer to any of these questions is yes, now may be the time to refinance your car.
Let’s take a look at all of the factors that you’ll want to consider when deciding when to refinance your car loan.
Your Credit Score
Your credit history is one of the biggest factors in being able to refinance with most lenders. If you have good enough credit, then refinancing your car could save you money.
Refinancing can be a great option if you have improved your credit and want lower monthly payments or to get a longer term on your loan. Better credit can also qualify you for a lower rate than you initially received so that you can pay less overall, regardless of whether or not you want a lower monthly payment.
The only thing worth noting when it comes to your credit score is that you’ll want to avoid refinancing multiple times, as doing so could hurt your score, and rates usually go up with each refinance.
Your Cash Flow
If your income has gone down or you want more money in your pocket for added expenses, refinancing your auto loan could make sense for you. Doing so can lower your monthly payments and help save some cash.
Refinancing offers tons of potential savings and can be helpful for people who have limited cash flow. For example, if you’re unemployed and need money in your pocket right away, refinancing can lower your monthly payments and even give you the option to take a few months off from making a payment.
Before refinancing your car loan, make sure you refinance for the best possible price. Shop around and compare offers before signing any paperwork to make sure you’re saving as much as possible. Unlike the competition, at Auto Approve, we never mark up the rate the bank offers you, so we pass maximum savings on to you.
Your Existing Loan
When thinking about whether or not to refinance your car loan, it is important to know the current interest rate and term of your loan. You should consider the amount of time left on your loan and any prepayment penalties.
Prepayment penalties
Prepayment penalties are fees your lender charges you for paying off the loan before it is due. Watch out! Some lenders will not refinance loans that have prepayment penalties attached.
That said, even if your current loan has a penalty attached, it may still be worth it for you to refinance. In some cases, you may be able to save more by refinancing than the cost of the penalty. This is especially true if you got a particularly bad rate on your existing loan (which frequently happens when you buy a new car directly from the dealer).
Time remaining
If you have several years left on your current auto loan at an unfavorable rate or your existing loan has high fees, refinancing may be the right decision. After all, refinancing your car loan can be a great way to save money on interest and get lower monthly payments.
If you refinance your loan to a longer term, you’ll likely be able to lower your monthly payments – but you could end up paying more in interest. On the flip side, if you can refinance at a lower interest rate and at a similar or even shorter loan term, you’ll be able to save money in the long run. (That’s one of the things that makes refinancing so great!)
Eligibility For A New Loan
Here’s a good question: What makes you eligible to refinance your car?
Well, it varies based on the lender, but eligibility can depend on:
- how old your car is
- how many miles you have on it
- how much money is left on your loan
- and other factors
If you’re not sure whether you’re eligible to refinance, don’t worry – we can help! Talk to one of our knowledgeable and friendly Auto Approve agents or use our handy online quote form to find out if your vehicle loan qualifies and how much you might be able to save in a jiffy.
Interest Rates
With all that out of the way, one of the most important factors you should consider when deciding when you should refinance your car is the broader picture of interest rates.
When it comes to interest rates, there’s no time like the present to refinance your car loan. There are a lot of reasons why refinance rates may be lower now. Interest rates have been historically low for years but hit an exceptional low during the COVID-19 pandemic. As of today, they’ve only increased slightly since 2020.
However, it’s possible that interest rates may go up in 2022. If that happens, then refinancing may become less helpful for those looking to put a little money back in their pocket with a lower payment, better rate, or both.
With that in mind, if you’re eligible, it’s a great time to refinance your automobile right now.
And that’s everything you need to know about choosing when to refinance your car loan.
Many things go into the decision to refinance your loan, but these tips should help you know what to look for. After reading these tips, it should be clear whether refinancing may be the right decision for you right now – and if now's the time, give Auto Approve a try.
