MoneyWisdom Blog

When Should You Refinance Your Car Loan?

Posted by Bill Burpeau on Mar 10, 2016, 1:01:52 PM

Auto_Loan_Refinancing.pngRefinancing your vehicle loan is a little-used yet valuable tool that can help you reduce costs and manage your money. Does it make sense for you?

Even saving a mere ½ % on a $20,000 auto loan with a 5 year term puts almost $10 in your pocket each month and saves you $238 in interest over the life of the loan. A full percent puts almost $15 in your pocket and saves you about $500 in interest. This may seem small, but at no cost to you, 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:

  1. 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.
  2. Your credit score has improved. This could qualify you for a lower rate.
  3. If interest rates have dropped. We’ve seen super low interest rates for a long time, but it never hurts to keep an eye out.
  4. Your car lease is expiring and you would like to purchase the car.
  5. Your personal finances have taken a hit and you need to get some capital. Borrowing money using the equity in your car gets you an incredibly low loan rate.

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 loan term, here’s what to do:

  1. Review your current vehicle loan. If the loan is not with us, make sure your loan does not have any prepayment penalties. Check the original loan value, rate you are paying, term of your current loan, and the number of payments you’ve made.
  2. Check our interest rates and compare them to the rate you are paying now.
  3. If you think you can get a better rate and save on your monthly payments or shorten your term, fill out the 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.

How much can you save if you refinance your auto loan? Click here to find out!

 

Topics: Cars

Bill_BurpeauBill Burpeau, Relationship Manager for Hanscom FCU, is an author and teaches personal financial management at events and seminars. His favorite quote is from John Maxwell – “If you don’t tell your money what to do, you’ll wind up wondering where it all went.”
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