For most people, an auto loan is what makes it possible to buy a car. You agree to the terms, interest rate, and monthly payment because it allows you the freedom to have your own vehicle. Depending on your circumstances, the terms of that loan may have felt reasonable at the time. But as time goes on, you may feel like there are better options out there.
Just because you have an auto loan with a certain lender doesn’t mean you have to stay with that lender for life. The option to refinance your auto loan with a different financial institution is available to most people and has the potential to greatly improve your financial situation by lowering your monthly payments or decreasing your interest rate. A lower interest rate could put more money in your pocket later on, and when you choose to refinance your auto loan with a credit union, you can be eligible for some of the lowest interest rates available.
Are you considering refinancing your auto loan? Here are a few questions that can help you decide if it’s the best option for you.
Is your interest rate too high?
Does your interest rate feel high? It could be if you purchased your car when market rates were higher. Now, with rates relatively low, you might have an opportunity to refinance at a lower rate. By adjusting your rate, you’ll pay less interest over the life of the loan.
Do you want to lower your monthly payment?
When you agree to an auto loan, you also agree to a monthly payment. Sure, the amount you agreed to may have worked for you at first, but if your financial situation changes, it may become harder for you to continue paying your monthly auto payments. Instead of defaulting on the loan, you might be able to refinance it to help lower your monthly payments.
When you choose to refinance your auto loan, you can also choose to lengthen the term. Though the loan amount will remain the same, increasing your term by a matter of months will stretch out the payment and lower what you owe monthly. This is a great short-term solution to ensure you can keep your car and make timely payments. But if this is your long-term solution, it could be problematic. While your monthly payments will be lower each month, if you wait longer to pay off the loan entirely, you’ll accumulate more interest, and less of your money will go toward paying off the principal.
Do you want to pay your loan off quicker?
Maybe you have a goal to be debt-free or simply pay off your loan faster than the term of the loan. By refinancing to a lower rate, you can keep paying what you’re paying now, but you’ll be putting more towards the principle. The longer you plan on keeping your car, the more you will save.
Did you get your auto loan from a dealership?
Getting your car loan from a dealership may seem convenient at the time, but it will probably come with a higher interest rate. Dealers are able to mark up their interest rates because part of the profit they make from doing so will find its way back to them. Though it makes financial sense for them, you’ll end up paying more than you need to.
Getting away from the “for-profit” way of thinking is the reason many people choose to work with credit unions, such as Rivermark. These financial insinuations are not-for-profit and won’t mark up your interest rates to make more money. Not worrying about profits allows credit unions to focus more on customer service, getting you the best deals, and helping you to get approved for the loans you need.
Do you want to remove someone from your loan?
Not everyone on your auto loan initially will want to remain on it indefinitely. And if they’re no longer taking part in the ownership of the vehicle or assisting you financially, they should be allowed to be taken off. This is a popular reason to refinance auto loans.
Depending on your financial situation when applying for a loan, you may have needed a co-signer. This additional signature will allow you to receive the loan, but that other person will be held responsible if, for some reason, you stop making monthly payments. If your financial situation improves, the co-signer may want to be released from that responsibility, and refinancing is the perfect way to do that while also potentially receiving other perks.
Has your credit improved?
Your credit score plays a big part in the terms of your auto loan. That’s why you should always be aware of your score and look for ways to improve it. A low credit score might not prevent you from securing an auto loan, but it can cause your lender to give you a higher interest rate. While this still allows you to buy the car you want, it means you pay more down the road.
If your credit score has improved since the time you applied for your loan, it may be a good time for auto refinance. A high credit score will appeal to new lenders and allow them to offer you the best interest rates possible. So, if your credit score has significantly improved and you’re looking to save money, auto refinance may be the right choice.
Have you found better interest options?
One thing that people dread about loans is the interest, especially if it’s high. If the interest on your loan is too high, you could end up spending thousands of extra dollars. This is why people are always on the hunt for the best interest rates.
Finding the best rates isn’t always easy. Maybe you happened to need an auto loan during a time when market rates were higher. But these things are always changing, and if you see that interest rates are dropping, refinancing your auto loan can be the way to lower your interest rate.
Do you want to do all your banking in one place?
When you’re truly satisfied with your financial institution, you’ll probably have the urge to do all of your banking there. Having all your loans and finances in one place makes them easier to keep track of and manage. And when you trust the people you’re banking with, you won’t want to put your money anywhere else.
Rivermark provides a variety of financial services to take care of the needs of our members. We offer auto refinancing with amazing interest rates and no loan fees. If you’re ready to refinance your auto loan, you can apply online.
