Refinancing Your Car Loan
Refinancing your auto loan – or replacing your current loan with a new one (usually with better terms) – can be a great way to lower your monthly car payment and save money, but it may not be right for everyone.
Here’s some factors to consider when deciding whether refinancing makes sense for you:
- Have Interest Rates Dropped?
- Interest rates can fluctuate over time depending on the economy. If rates have gone down since you purchased your vehicle, refinancing may save you money.
- Does Your Current Loan Have High Interest?
- Interest rates can fluctuate over time depending on the economy. If rates have gone down since you purchased your vehicle, refinancing may save you money.
- Has Your Credit Score Improved?
- If your credit score has risen since you bought your vehicle, you may qualify for a lower rate. Even 6-12 months of on-time payments can positively impact your score and allow you to refinance at a lower rate.
- Need To Adjust Your Loan Term?
- You may want to extend the term of your loan (increase the repayment period) if you need to lower your monthly payment or reduce the term if you want to pay off your car faster. First Community offers especially flexible auto loan terms.
How Much Can You Save By Refinancing?
Even a small reduction in your interest rate can lead to savings. For example:
Refinancing a $25,000 loan from 8% to 5% could save you money.
Comparison Table: Before vs. After Refinancing
| Feature | Before Refinancing | After Refinancing |
|---|---|---|
| Interest Rate | 8% | 5% |
| Monthly Payment | $610 | $576 |
| Loan Term Remaining | 48 months | 48 months |
| Total Interest Paid | $4,280 | $2,648 |
Example based on a $25,000 loan. Actual savings may vary. Rates and terms may vary based on creditworthiness and other factors.
Depending on the amount remaining on your loan and your current rate, even a one-point reduction would make refinancing worthwhile. First Community’s handy refinance calculator allows you to enter your current loan terms and then see what your monthly payments would be under different loan terms.
What Should You Look For When Refinancing?
Everyone’s situation is different, so do your homework and shop around to find the best deals.
- Low Interest Rates: Rates can vary widely between lenders. Credit unions tend to offer the lowest rates for auto loans. First Community’s competitive rates compare favorably with most lenders.
- Flexible Terms: Choose a term that fits your budget and goals.
- No Hidden Fees: Refinancing includes some fees, so make sure your lender is up-front and transparent about them.
- Quick and Easy Process: The application should be online, easy to complete, and a decision should be delivered promptly.
If you think refinancing your auto loan might be the right choice for you, check out First Community Credit Union – which offers competitive rates and a fast, trustworthy, transparent, and convenient loan experience.
