Benefits of Refinancing Your Auto Loan

Refinance your auto loan to save

When you think of refinancing, you probably think of your mortgage or another equity loan, but you may not realize that it is also possible to refinance your auto loan, and that oversight may be costing you money. Many people are able to save by refinancing their auto loans, and the following information can help you determine if it could be the right choice for you.

Even if you haven’t heard about automotive loan refinancing, the good news is that it is a simpler process than refinancing a mortgage. The basic idea is that you obtain a new loan from your financial institution in order to pay off your first loan. Obviously, in order to save, the new loan must have a more favorable interest rate.

Fortunately, you don’t even need to score a much lower rate to save; a small percentage can mean great things for your account balance. Just finding a new loan with an interest rate a single percentage point lower can save you big, especially if you have a substantial amount left to pay off the balance of your loan.

The process of completing an auto loan refinance application only takes a few minutes, and many financial institutions allow you to do it online. Because the process is so convenient, it is hard to find a reason not to try.

“Refinancing essentially helps anyone who wants to save some money,” states the Department of Motor Vehicles (DMV). “Even those who got a good rate on their loan can still gain by refinancing, especially during periods of dramatic rate drops.”

They are particularly beneficial to anyone who has a poor credit score or insufficient credit history, is unemployed or has a loan with an interest rate that is currently at a high point. Refinancing is also beneficial for people who have increased debt since the loan was originally issued, after buying a house, for example.

One thing to keep in mind is that it is important that you have been making regular loan payments before you apply to refinance. If you have a good payment history, you should plan a time to apply to refinance. Financial experts have varying opinions on how long to wait between receiving your loan and trying to refinance.

“Some say six months is appropriate, while others recommend 18 months. But, again, it doesn’t hurt to try to refinance,” states the DMV. However, the DMV cautions that,
“Some lenders do run a credit history check as soon as you apply for a loan, which could slightly lower your credit score for a few months.”

How much you save depends on several factors, including the amount left on the loan, the refinance rate and the initial interest rate. Depending on these variables, you could save hundreds or even thousands of dollars.

“Is there a downside to all this? No. That’s because, unlike home mortgages, many auto loans don’t charge prepayment penalties or fees to set up the loan,” according to senior consumer advice editor of Edmunds, Philip Reed. “And consumers can complete the application process online in about 15 minutes.”

All of these benefits of auto loan refinancing and the simplicity of the process makes auto loan refinancing a good prospect for most people. If you would like to see if you can save money by refinancing your auto loan, please feel free to give us a call today to have all of your questions answered.