If you are financing your SUV, you have probably considered refinancing your SUV loan. But maybe the timing wasn’t right, or you just didn’t think it was worth the hassle. Well today we are talking about why right now is a great time to refinance.
Here are our top three reasons to refinance your SUV.
Reason #1. Refinancing can save you money– a lot of money.
Saving money is the ultimate goal of refinancing. By finding a lower car loan APR, you can drastically reduce the interest that you will have to pay over the life of the loan.
Car loans are front loaded amortized loans. This means that in the beginning of your repayment you are primarily paying back the interest, and as time goes on you gradually pay more towards the principal and less towards the interest. So the earlier you refinance your SUV loan, the sooner you can start saving money.
There are two main reasons that you may be able to find a lower car loan APR: a change in market rates or an improvement in your credit score.
The interest rate that you are offered will depend in part on the prevailing market rates. If the market rates are lower now than they were when you originally financed you SUV, you will most likely be able to secure a lower car loan APR. While rates are on the rise, they are still very low, making now the perfect time to consider refinancing your SUV loan.
If your credit score has increased since your initial financing, you will most likely be able to secure a lower car loan APR if you refinance. Your credit score is the most important factor lenders look at when deciding what interest rate is appropriate. Your credit score is dependent on a few factors:
- Payment history (35%)
- Amounts owed (30%)
- Length of credit history (15%)
- Credit mix (10%)
- New credit (10%)
Your payment history and amounts owed make up the largest portion of your credit score. Making full, consistent, on-time payments and reducing the amount of overall debt you owe will make the biggest difference on your credit score. If you have been paying down your debts and consistently paying your bills, there is a good chance that your credit score has increased and you can secure a lower car loan APR.
Reason #2. Refinancing can help you with your monthly budget.
By refinancing your SUV, you can loosen up your monthly budget significantly. Your monthly car payment can be reduced by either lowering your car loan APR or lengthening your repayment period (or both).
Reducing your car loan APR will automatically reduce the amount of your monthly car payment. Let’s say you buy a $25,000 car with a $5,000 down payment. You finance the remaining $20,000 with a 7% loan over 48 months. Your monthly payments will be around $480. But let’s say you now refinance your loan to a 3.5% APR. Now your monthly payments are down to around $445. That little extra might make all the difference in your monthly budget. Over the course of four years, that’s a savings of over $1,000.
Lengthening your repayment period will also change your monthly payments significantly. Let’s look at that same $20,000 loan at 7% over 48 months. Changing your repayment period to 60 months will change your monthly payments from around $480 to around $400. That is a huge monthly savings (although keep in mind that you will be paying more interest over the life of the loan due to the extended repayment).
If a little extra breathing room would help you with your monthly budget, refinancing your SUV is a great way to save some extra money.
Reason #3. Refinancing can get you out of a bad deal.
It’s all too common for people to get roped into bad financing deals. A lot of the time it’s due to a smooth talking salesman and a moment of weakness. If you were a little underprepared when you went to look at a new SUV, you may have been blindsided and agreed to something that was less than ideal. There are a few reasons that you may view your loan as unfavorable:
The APR is too high
Car dealerships have notoriously high APRs. This is because they merely act as middlemen in your loan transaction with the lender. They simply markup the rates and fees that the lender offers. You should always avoid financing through dealerships–it’s much better to get a loan through Auto Approve. Unlike dealerships, Auto Approve never marks up their prices–ever. They compare different lenders and offers and pass the savings right on to you.
The lender has bad customer service
Bad customer service can be a serious issue when it comes to financing. Not only is it downright frustrating to not be able to communicate when you need it, but it can cost you money.
According to Consumer Financial Protection Bureau, these are the major complaints with lenders:
- Communication issues about forbearance (a temporary pause in payments)
- Repayment options regarding forbearance
- Delays from lender with regard to loan modification
- Overcollection of funds for taxes and insurance
- Confusion with account notices
- Putting overpayments into an unallocated fund rather than applying them to the loan’s principal
These issues with lenders can add up and cost you money in the long run. So if you are in a bad relationship, you want to get out of it immediately. Refinancing your loan is a great way to do that.
The repayment period is too long
While a longer repayment period will reduce your monthly loan payments, it will cost you more in the long run. If you are able to refinance your loan for a shorter period, you can save a lot of money.
You had to use a cosigner
If your credit was not great, you may have needed a cosigner to get approved for your current loan. The only way to remove a cosigner is to refinance your loan. So if you are looking to take sole ownership of your loan, refinancing is the way to go.
And those are the top three reasons you would refinance your SUV.
There are a lot of great reasons to refinance your SUV. From saving money to saving yourself from frustration, refinance can make your financial life much easier. If refinance sounds like a good option for you, contact Auto Approve today. Our experts can answer any questions and help you start saving money now.
Don’t wait to start saving – get your free quote!