If you’re thinking about refinancing your car loan, you’re probably hoping to lower your monthly payment. But there are other factors to consider.
Here are 6 tips to think about when deciding whether or not to refinance your auto loan:
1. Refinancing requirements
Each financial institution or lender has specific refinancing requirements, so be sure to ask about the details. The DECU Loan Payment Calculator will show you whether refinancing can save you money.
2. Prepayment penalties
Does your current lender subject you to a prepayment penalty for paying off your loan early? DECU vehicle loans don’t have such penalties, but if you're subject to one, do the math: If the amount you save by refinancing is significantly greater than the penalty, refinancing may still be a good idea.
3. Interest rates
If the interest rate you qualify for today is significantly lower than your current loan rate, it may be a good time to refinance a car. If it’s the same or higher, it’s probably not the right time to refinance.
4. Your credit score
Has your credit score changed since your original car loan? If it’s improved, your better score may help you qualify for a lower interest rate. Learn more about how to improve your credit score.
5. Your income
Refinancing your auto loan so you have a lower monthly payment can make sense if your income has dipped. The lower payment can help ease the strain on your monthly budget — and if you don’t have one, think about creating a budget so you can better control all your finances.
6. Time remaining on your loan
Refinancing and extending your loan term can lower your payments and keep more money in your pocket each month — but you may pay more in interest in the long run. On the other hand, refinancing to a lower interest rate at the same or shorter term as you have now will help you pay less overall.
Contact the DECU Financial Services Team to get started. One of our advocates will be in touch within a single business day. Let’s save you some money!