Intrigued by the idea of refinancing your auto loan? While refinancing a car loan can be beneficial, you should first determine if it’s the best option for you. Here are some details to consider when deciding if you should refinance your auto loan.
Learn more about interest rates, credit scores, and loan lengths to make an informed refinancing decision.
Review Your Interest Rate
One of the biggest factors that can influence your decision to refinance a car loan is your current loan’s interest rate. Is your current interest rate above or below the national average? How much of your monthly loan payment is going toward interest? Knowing the answers to these and other questions will help guide your decision of whether or not to refinance the loan.
You should also compare the interest rate you could potentially receive if you refinance to your current rate. If the refinanced rate is significantly lower, then it may be a positive change. However, if the interest rate after refinancing will only be slightly lower than your current rate, you’ll need to consider whether the change will be worth any fees associated with refinancing.
Consider the Lender
Are you happy with your current lender or do issues always seem to crop up? How satisfied you are with your current car loan lender may influence whether or not you refinance. Of course, you’ll want to ensure the lender you refinance with will provide a better relationship than what you currently have. You can do this by researching the reputation of the potential lender.
Look at the Loan Length
Can you shorten the length of your auto loan by refinancing? Reducing the duration of your car loan can help you pay off the loan sooner, which means you’ll no longer have the debt to repay. Of course, shortening an auto loan may increase your monthly payments depending on what interest rate you’re offered on the refinance. According to Consider an Auto Loan Refinance, you should review the numbers and determine how a change in loan length may influence those figures.
Review Your Credit Score
How does your current credit score compare to your credit score at the time you took out the original car loan. If your credit score is better now than it was in the past, refinancing your loan may be a wise option. It may be wise because your improved credit score could help you receive a lower loan interest rate. Of course, several factors can influence the interest rate you’ll receive through a refinance, so be sure to compare the offers of a few lenders.
Look at the Payment Amount
Will your monthly payment of a refinanced loan be higher, lower or the same as what you’re currently paying? Again, the payment can be influenced by such factors as the new loan length, your refinanced interest rate and more. If you are shortening the duration of your loan while increasing your monthly payment, be sure you can afford the payment increase.
Not sure if you should refinance your auto loan? From reviewing your current interest rate to comparing your previous and present credit scores, several factors can influence whether this change is right for you. Consider all of the influencing factors to make an informed decision.