If you're like most people these days, you may wondering how you can stretch your paycheck a little more this month.
With the cost of everything rising left and right, whether you're trying to make ends meet, looking to save for a big purchase, or simply looking for more disposable income, many of us are looking for ways to save a few dollars.
Here's the good news. Refinancing your truck may be a quick and easy way to reduce your monthly payments and give your wallet some much needed breathing room.
So what does it mean to refinance a loan exactly?
To put it simply, refinancing is paying off your existing loan with a new loan that ideally has better terms. Most people are overpaying every month for their truck loan, and refinancing is a straightforward way to fix that.
So when exactly is the best time to refinance your truck? Consider the following factors to determine the best time for refinancing.
- Your personal finances, including your credit score, income, and future cash flow
- Your current loan’s terms, including prepayment penalties and time remaining
- Current interest rates
Let’s take a closer look.
Here are the major factors to consider when deciding when to refinance a truck.
Your personal finances
Trying to determine when is a good time to refinance a car loan or truck loan is going to vary from individual to individual. Your personal finances will be a huge factor as to when you should consider refinancing. It is important to think about your credit score, your income, and your cash flow when making this decision.
Your credit score
You might be wondering, “what credit score do I need to refinance my car or truck?” The truth is there is no one magic number that will make refinancing make sense. It is important instead to look at how your credit score has changed since you last financed your truck.
To put it plainly, has your credit score increased or decreased?
If it has increased, even only slightly, you may qualify for a lower interest rate. This leads to more savings every month and more money in your pocket. If your credit score has gone down, this might not be the best time to consider a vehicle refinance.
A good credit score is one of the most important factors in securing a good interest rate, so keep a close eye on your score to determine the best time to refinance.
Has your income decreased since your original financing? So many people have experienced decreased earnings in the past few years and are in need of extra cash to meet their monthly obligations. If your income has decreased recently, refinancing is a great way to reduce your monthly payments and help bridge the gap between earnings and expenses.
Your cash flow
What are your plans for the future, and do you have the cash flow to help you get there? Maybe your family is expanding and you could use the extra cash, or you finally want to pull the trigger on that bathroom remodel you’ve been talking about for years. Refinancing your truck might be the answer to your cash flow question.
You may be eligible to refinance and borrow additional money based on your truck’s value. You can also use this money to cover other expenses, such as paying off credit card bills or catching up on medical bills. It is important to be careful here, however; a truck is a constantly depreciating asset, so you do not want to risk owing more money on your truck than it is worth.
Your current loan’s terms
In addition to your personal finances, it is important to look at the current terms of your auto loan to determine whether or not it is the right time to refinance your vehicle. The amount of time you have left in your repayment period will affect whether or not refinancing is worthwhile. In addition, some lenders charge fees should you choose to pay back your loan early. It is important to check these terms and weigh your options.
How much time is left on your current loan’s pay period? If refinancing to a lower interest rate results in a similar or shorter payment period with a lower rate, you will certainly reduce your payments and save money overall.
But what if refinancing your truck lengthens your payment period?
This may lead to lower monthly payments, but the additional payment period means you may be paying more money overall. This decrease in monthly payments may still make sense though, depending on your financial situation. It is important to look at all of your options and do the math to decide whether or not it is a good time to refinance your truck. The experts at Auto Approve can help you compare different options from different lenders to optimize your vehicle refinance.
Does your current lender have prepayment penalties? Some lenders charge a penalty for paying off early, making it more of a burden to refinance. Prepayment penalties help these companies to offset the lost profits that come as a result of paying off loans early. To find out if your loan has a prepayment penalty, you can look through your contract or contact the lender directly to find out.
If you find out there is a penalty associated with paying off your loan early, be sure to sit down and do the math. If the penalties of refinancing your truck are outweighed by the savings, it still might make sense to refinance.
While there can be exit and transfer fees associated with refinancing, rest assured that, at Auto Approve, we never markup the price that you pay.
Today’s interest rates
Interest rates in 2021 have only increased slightly since 2020’s historically low interest rates. It is hard to predict what 2022 will bring economically, but many experts think that over the next two years the interest rates will likely rise. This means that it will make more sense to refinance your truck sooner rather than later. It is important to take advantage of the historically low interest rates while it is possible to do so.
It is important to consider all of these factors when deciding the best time to refinance your truck.
Should you refinance your car or truck? Is refinancing a vehicle worth it? As you can see there are many factors that must be taken into account. Ultimately, you want to get the shortest loan term combined with the lowest interest rate to guarantee you are getting the best truck loan possible.
At Auto Approve, we advocate to get you the best rates and best deals from leading lenders. Because, at the end of the day, we all just want to keep a little more of our hard earned cash in our pockets.
If you're ready to refinance your truck, we can help.