Refinancing your vehicle loan is a little-used, yet valuable, tool that can help you save your money. Here's how to know if refinancing makes financial sense for you.
When Is It Worth Refinancing?
Reducing your $20,000/five-year-term auto loan by 0.50% puts almost $10 in your pocket each month and saves you $238 in interest over the life of the loan. Refinancing a full percent point puts almost $15 in your pocket and saves you about $500 in interest. These amounts may seem small, but when there's no cost to refinance a loan, isn’t the money better off in your pocket than someone else’s?
So, when should you look at possibly refinancing your car? Here are five occasions:
- If you didn’t get the best rate you could have when purchasing your vehicle. Use our refinancing calculator to see how much you can save.
- Your credit score has improved since you got your loan. A better score could qualify you for a lower rate.
- If interest rates have dropped. Rates are low right now, so they could be worth checking out.
- Your car lease is expiring and you would like to purchase the car.
- Your personal finances have taken a hit and you need some additional cash flow. You may be able to borrow money using the equity in your car and get a good loan rate to do so.
How to Refinance Your Car Loan
If you find yourself in any of these situations, or are just curious to see if you could lower monthly payments or shorten your vehicle's loan term, here’s what to do:
- Review your current vehicle loan. If the loan is not with Hanscom Federal Credit Union, make sure your loan does not have any prepayment penalties. Check the original loan value, the rate you are paying, the term of your current loan, and the number of payments you’ve made.
- Check out our loan rates and compare them with the rate you're paying now.
- If you think you can get a better rate with us and save on your monthly payments or shorten your term, fill out our online form or give us a call at 800-656-4328.
Refinancing an auto loan is easy, quick, and can help stretch precious dollars in your budget. It also makes financial sense to pay less interest and put that money toward something constructive – like tucking it away in a retirement account or saving it to put toward the purchase of your next car.
Your Guide to Smart Auto Financing is a free eGuide that gives you the information you need to make the best auto purchasing and lending decisions. It covers vehicle features to consider, financing considerations, price negotiations, legalities and protecting your rights, choosing the best financing options, and how you can get the best of buying and leasing with our Better Than a Lease program. Download this free guide here.
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