Feeling Stuck In Your Auto Loan? Refinance With Palisades CU!
With all the attention paid to refinancing home mortgages, refinancing your auto loan to a better rate may not have even crossed your mind! Just like with a home mortgage, refinancing your auto loan can lead to a lower monthly payment, a shorter term, or both! While the amount of money you can save depends on a variety of factors like how much you owe on your current loan and your credit score, it does not hurt to review your options.
Not sure if refinancing is right for you? Here are a few scenarios where refinancing makes sense.
- Your Credit Score Improves
One of the biggest factors in determining your auto loan status is your credit score. When your lender is building a loan package, a credit report is pulled as a central part of that process. That number helps define your interest rate.
It’s worth keeping a copy of the credit report your lender pulled. That can let you see if your credit score has improved. It can take as little as nine months of steady repayment to boost your credit score, and that could result in a cheaper loan if you refinance.
If you didn’t have much experience with credit when you purchased your vehicle, refinancing can do you a world of good. Interest rates as high as 18% are common for borrowers who have little to no credit history. Having even a few months of solid payments on your side can cut that rate in half or more.
- You Didn’t Shop Around Before You Borrowed
Many people feel railroaded throughout the car-buying process. They pick a car they like, then they are told what the price is, what the monthly payment is and everything else. It may seem like the choice of lenders for your car loan is predetermined.
Dealers tend to have a smaller range of lenders with whom they work exclusively. Those lenders know they have limited exposure to competition, so they can charge slightly higher fees and interest rates. By doing your own comparison shopping, you can save quite a bit on both the loan and any ancillary insurances or warranties you may have purchased. Dealer rates tend to be 1 to 1.5% higher than those offered at smaller lenders, like credit unions.
- You Need To Change Your Monthly Payment
You may be in a much better financial situation now than when you bought your car. You may have a better job or more security. You may have paid off credit card or other debt. All of these things free up how much you can pay per month.
Most people don’t go into the refinancing process looking to increase their monthly payment, but you can save yourself money in the long term by committing to a faster repayment plan. If you can afford to pay more per month now, you can pay off the balance on your car faster. Shorter term loans usually also have lower interest rates, since the lender assumes less risk in making the loan. Once the car is paid off, you’ll have all that money to devote to other saving or spending priorities.
Ready to see how much you can save by refinancing your auto loan with Palisades Credit Union? Click here to get started!
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