When people think about refinancing a major loan, they often think about refinancing a home by taking out what is sometimes called a “second mortgage.” But there are other loans that can be refinanced as well, and that includes auto loans.
What does refinancing mean?
Let’s start with the basics! Financing a purchase is a way to buy and take possession of something now, but pay for it over a specified period of time. It is essentially a kind of loan, where you use the money to immediately make a major purchase.
Financing benefits you because it helps you get something you need faster than if you had to pay for 100% of the expenses up front. And it helps the lender because they get to charge you interest.
Many people use financing to buy a car because cars are an expensive consumer item, and saving thousands of dollars can take too much time when you need a car to get to all the places you need to go, including to work, school, and family’s homes. Financing gives you more freedom and flexibility, as long as you are able to borrow the right amount and pay it all back over the determined time frame.
Refinancing, then, is the process of applying for a new loan and using it to pay off the balance of the old loan. There are several reasons to do this, but they often involve getting away from a lender you don’t want to work with anymore, lowering your interest rate, or wanting to find a loan with better borrowing terms than your current one.
When should you consider refinancing a car loan?
While there are many reasons for someone to refinance a major purchase, some reasons are more common than others.
You should consider refinancing your auto loan if:
- Your credit score has increased significantly since you purchased the car, and therefore you are now eligible for better borrowing terms, such as reduced interest rates.
- You want to change the payoff terms of the loan and want to pay it off faster.
- You want to change the payoff terms and need more time to make payments.
- There are other benefits to switching which lender you are working with.
Getting a great interest rate for your auto refinance!
One of your goals for refinancing should be to lower your existing interest rate.
According to Credit Karma, the interest rate for your auto loan is determined by five main factors:
- Your credit score
- Your income
- Your current debts
- The loan amount
- The loan term
Improving any of those areas can have the potential to improve your interest rate when you refinance.
For example, if you have changed to a new job with a higher income, you will likely see an improvement in your credit score as well as your interest rate. If your credit score has gone up because you have paid off a lot of other debts, that will help, too. Refinancing means you should be taking out a smaller loan this time, or for a different amount of time, and that can influence your interest rate as well. A shorter loan period often means a lower interest rate.
When you’re ready to refinance your auto loan, let’s talk!
Here at WEOKIE, we know about loan refinancing, including the process of refinancing an auto loan. We can help you figure out if refinancing is a good idea for your specific financial situation, and we understand that every individual’s finances are totally unique to their experiences and circumstances.
We look forward to helping you take the next steps in reducing your overall monthly payments by refinancing your car loan with one of our loan programs, many of which have low interest rates and great lending terms!
If you would like to see if WEOKIE can save you money on your auto loan with our easy calculator, we’d love to help you out during this difficult time. You might save hundreds or thousands of dollars. We’ve already helped many people just like you.
Get in touch today to set up an appointment or ask us your questions!
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