There are many different reasons why you might choose to refinance your auto loan. Refinancing can help you get a lower interest rate on your car loan, give you more manageable monthly payments, and even change the timeline on your loan. At Resource One Credit Union, we can help you to explore your options if you are thinking about refinancing. We can also answer any outstanding questions that you might have about refinancing your car loan, such as, “When should I refinance my car loan?” and, “Is it easier to refinance with my current lender or a new lender?”
When Should I Refinance My Car Loan?
Loan refinancing—whether it’s for a car loan, mortgage, or personal loan—means taking out a new loan to pay off an old one. While this process can sound laborious on paper and does involve some legwork, not to mention paying closing costs on a new loan, it can also unlock significant benefits that are well worth considering.
Here are a few situations in which refinancing your auto loan might be advantageous to you:
- You have a chance to get a lower interest rate. The most common reason to refinance a car loan or other loan is the chance to secure a lower interest rate. The higher your interest rate, the more money you will pay over the lifespan of your loan. A lower interest rate can also save you money on your monthly payments, reducing your expenses and freeing you up to save faster or use those funds for something else. Car loan interest rates are determined by a combination of factors that includes your income, credit score, loan amount, and loan term. If any of these factors change, then you might be eligible for a lower interest rate than the one associated with your current loan.
- You are having trouble managing your monthly payment. Economic situations change, sometimes unpredictably. Maybe you took on a car loan that you had no issue managing at the time, but you are now having trouble making the monthly payments. If you are in this situation, talk with your lender about refinancing to get a lower monthly payment. Even if your income or credit score doesn’t qualify you for a lower interest rate, you can potentially modify your loan term to reduce how much you owe each month.
- You want to change your loan term. Refinancing your car loan to extend your loan term can reduce your loan payment. Do note that a longer loan term will typically come with a higher interest rate, which means that you will pay more on the loan over its lifetime. You can also refinance to shorten your loan term, which can reduce your payments and get you “free and clear” on your car faster. This option is especially worth considering if you have excess cash flow and want to pay off your car sooner but have an existing car loan with penalties for paying off your loan early.
- Your vehicle is approaching an age or mileage restriction. Another reason to refinance your car loan relates to practicality. Most lenders have age or mileage restrictions on auto loan refinancing. If a car is older than ten years (sometimes seven years) and has more than 100,000 miles, you might struggle to find lenders willing to refinance a loan for that vehicle. If you are approaching one of these milestones, it might be the right time to investigate refinancing before that option is off the table.
Is It Easier to Refinance with My Current Lender?
“Can I refinance my car with the same lender? Can I refinance with a new lender?” These kinds of questions are common among auto owners who are considering refinancing.
When you buy a car, you either shop around with different lenders for a loan or ask the auto dealer that you buy from to set up a loan for you. When you refinance, it is smart to engage in the same process of shopping around for the best possible option for you.
You are not locked into using the same lender that currently holds your loan. Your priority should be finding the most favorable loan terms possible, which typically means finding a lender that will offer you the lowest interest rate. In some cases, that may be your existing lender—in other cases, it will be a new lender. Rate shopping will give you a broader sense of the market and what constitutes a genuine deal.
While it may seem easier to stay with the same lender, any lender willing to give you a refinancing loan will work with you to make the process as seamless as possible. There’s no reason to be worried that switching to a new lender will make your journey with a loan more complex.
Refinancing Options Available at Resource One Credit Union
At Resource One Credit Union, we are happy to speak with you at any time about your options for refinancing an existing auto loan. Whether your current loan is with us or another bank or credit union, you can trust us to provide a fair and honest loan offer with a competitive interest rate. If you need help deciding which loan term is right for you or other loan specifics, we can lend a hand.
Contact us today to start a conversation about auto loans and unlock the extra financial comfort and freedom that a well-timed refinance can bring.