When Should You Refinance Your Auto Loan?
Do you feel like you’re paying too much every month for your car? If you’re unhappy, find out when you should consider refinancing your auto loan!
Sometimes, when it’s time to purchase a car, you don’t get the best deal on your auto loan. You must take what you can get at the time.
But eventually, your financial situation may change. If it does, you might be interested in refinancing your auto loan to lower the monthly payments and shorten the repayment time. Continue reading about when you should refinance your auto loan to find out if it’s a good option for you!
Wait a Minimum of Six Months to One Year
Taking out several new loans in a short period can reduce your credit score. The scenario isn’t favorable when you need to make important purchases in the future.
Instead, wait a minimum of six months to one year before refinancing an auto loan. It will help you build up your payment history and demonstrate to lenders that you’re a reliable client.
The Interest Rates Drop
Interest rates frequently change based on the status of the stock market, inflation, and various events occurring worldwide. If you signed your auto loan at a high interest rate and the number decreases significantly, it might be a good idea to refinance the loan. It will save you considerable money as you continue to pay off the loan for the next several years.
Improved Credit Score
Your credit score impacts a variety of things, including the quality of the loans offered by lenders. If you had a lower credit score when you got your original auto loan, it was likely more costly.
Now that you’ve improved your credit score, you should try to refinance your auto loan to receive a better payment plan. You can pay more monthly, shorten the payment timeline, and lower the interest rate. Spending your money responsibly and improving your credit score can make an immense difference in your financial situation.
The Lender Doesn’t Require Prepayment Penalties
Prepayment penalties are fees that some lenders will charge when you decide to pay part of the loan early. Since the lender determines the end date for the loan payments, they want to retain that original payment date.
Double-check if there are any prepayment penalties in place from your lender. If not, it could be a good idea to refinance your auto loan and complete the payment at an earlier date.
Switching to a New Lender
Not every lender operates the same way. Perhaps you had a poor experience with your current lender and feel it’s best to make the switch to a new one.
Consider a credit union auto loan at GFA Federal Credit Union! With a team you can trust and incredible member service, we’re here to help you pay off your auto loan efficiently.