When to Refinance a Car Loan

Living & Spending
on February 6, 2013

Many borrowers do not get the best terms when they agree to an auto loan. This leads to borrowers wanting to refinance their loan down the road. When is it a good idea to refinance your car loan?

Has Your Credit Improved?

If your credit score has gone up, you may want to think about refinancing your loan. A higher credit score means that you are entitled to a lower interest rate on your car loan. Drivers who are into saving money should take advantage of this fact. If you didn’t check your credit before your purchased your vehicle, you may be surprised to know that your score may be higher than what the dealer told you when you signed the loan agreement.

Do You Want To Pay Your Loan In Fewer Installments?

Refinancing your loan can be an attractive option if you want to pay the loan in fewer installments. Although this may raise your monthly payment, you are saving money because there is less interest to be paid over the life of the loan. Additionally, you may be able to get a lower interest rate on a short-term loan. When shopping for a new car loan, look to online banks and credit unions as they typically offer the lowest rates.

Have Interest Rates Dropped Across The Board?

During poor economic times, interest rates tend to drop on all loans. Therefore, you should take advantage of this by shopping for a new auto loan. It is an easy way to save money regardless of your current credit and financial situation. At least once a month, you should go online to check the prime rate. Most loans are offered at the prime rate plus one or two points. Therefore, you could be wasting money by not keeping your eye on this number.

Refinancing your car loan can save you a lot of money. When money is tight, saving $100 or more each month on your car payment can be a big help. Therefore, if your credit has improved, interest rates have dropped or you just want to pay your loan off faster, refinancing your loan is something that you need to look into right away.

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