Top Three Reasons To Refinance An Auto Loan

Have you ever considered refinancing an auto loan? While refinancing isn’t for everyone, there are a number of potential benefits that could help you. Here are the top three reasons why borrowers refinance their automobile loans.

1. Lower interest rates – If interest rates have dropped or if your credit score has improved since you financed your vehicle, you could qualify for a lower rate. Since your rate determines how much you will pay for the vehicle over the life of the loan, this can be a big money saver for some customers.
2. Reduced payments – Customers who are struggling to pay their monthly payment can sometimes benefit from refinancing. That’s because it may be possible to arrange a lower payment. This could be through extending the life of the loan to pay less monthly but for a longer amount of time or it could be because they qualify for a lower interest rate which decreases the amount owed.
3. Quicker pay offs – If your financial circumstances have improved, refinancing for a shorter term might mean an increased monthly payment but you will pay less in interest and own your car more quickly.

Sometimes borrowers will refinance a loan so they can remove a co-signer. It’s common for young lenders who lack established credit to need a co-signor when trying to secure their first auto loans. If you’re credit has improved, you can relieve your co-signer of their obligation to your debt with a simple refinance.

It’s important to know why you want to refinance. Is it because you need a lower monthly payment or are you mindful of the total cost of the loan over time. Do you just want to pay it off sooner? Sharing your goal with your lender will make it easier to serve you.

Be mindful before agreeing to anything. Ask about the total cost of the loan including interest and fees. Remember, a lower payment isn’t necessarily saving you money in the long run if the rates are higher and refinancing isn’t the best option for everyone. The best way to find is to start with a lender who will help you explore your options without applying pressure to act.

Thinking about refinancing your auto loan? Ask to speak with a lender in your local VCNB branch or click here to schedule a call or meeting with your trusted banker!