If you’re unhappy with the terms on your current auto loan, you may want to consider an auto loan refinance. Under the right circumstances, this process can potentially save you a significant amount of money.
The auto loan refinance process is relatively simple. You take out a new loan from a different lender in order to pay off your current car loan. This new loan will then replace your existing one, and you’ll begin making monthly payments to the new lender instead of the original one.
Determining whether you should refinance an auto loan can be an overwhelming decision. Fortunately, there are several important factors to evaluate which will help make the decision a lot more straightforward. The following tips will help you figure out whether an auto loan refinance is in your best interests.
Whenever you’re deciding whether to consider refinancing your auto loan, you must first evaluate your current financial needs to see if your circumstances have changed since you took out the initial car loan. It’s crucial that you understand the terms of your existing loan and do some number crunching on your finances to ensure you make the best decision. In general, it may be a good time to consider refinancing if you meet one or more of the following criteria.
One of the most important factors to consider when deciding whether to refinance your auto loan is the interest rate you’ll be able to secure. If you’re able to lower your interest rate, it provides a strong incentive to move forward with the auto loan refinance. This will typically save you a significant amount of money over the life of your loan by reducing the amount of total money you’ll have to pay in interest.
There are several reasons why you may be able to get a better interest rate when you refinance your car loan:
Paying off your loan faster is a great way to reduce the total amount of interest you pay over the lifetime of your auto loan. Refinancing can often be an effective way to reduce the term on your loan without significantly increasing the amount of your monthly payments. This is especially true if you’re able to secure a lower interest rate.
Trying to reduce the term of your loan through a refinance makes sense if:
Many people find that they’re struggling to keep up with their car payments. This may occur for several reasons:
Auto loan refinancing can often help you lower your monthly payments in one of two ways:
Keep in mind that if you choose to extend the duration of your loan to lower your payments, it may result in paying more money over the lifetime of the loan since you’ll be paying more interest. While this isn’t ideal, it may be the best scenario for your specific financial situation. If you’re struggling to make your payments each month, lowering this monthly cost may be worthwhile even if you spend more money in the long run. This is especially true if you’re in danger of defaulting on your existing loan.
Auto loan refinancing involves paying off your initial loan early. In most situations, this won’t be a problem. However, there are some loans which include a penalty for paying off the balance early. Always check the terms of your existing loan to see whether you face a prepayment penalty. If you don’t, then the decision to refinance should be based strictly on the factors above.
However, if there is a prepayment penalty, you’ll need to do some additional number crunching before moving forward with a car loan refinance. You may find out that the prepayment penalty will be less than the money you save by refinancing. If this is the case, then you should move forward with the refinance if you believe it is in your best interests. However, if these penalties cancel out the financial savings associated with refinancing, then it may not make sense to proceed.
There may be some situations when refinancing your car loan doesn’t make sense.
Interest payments are often front-loaded, so you’re mainly paying interest during the first couple of years of the loan. As the term gets closer to completion, you start paying off a larger portion of the principal. If you wait too long to refinance, you won’t be able to save as much on interest. This may significantly reduce the financial benefits associated with auto loan refinance.
Cars depreciate in value very fast. For this reason, many lenders are hesitant to refinance your car loan if the vehicle is very old or has high mileage since the vehicle may not be worth the total amount of the loan once interest is factored in.
Whenever you refinance a car loan, it results in a temporary reduction in your credit score due to the inquiry on your credit report and the fact that you haven’t yet demonstrated your ability to repay this new loan. This isn’t an issue if you aren’t in need of additional credit in the future.
But if you’re planning on applying for a mortgage or want to get a new credit card with generous benefits perks, you may want to hold off on your refinance until you’ve been approved for the credit you’re seeking. This way, you’ll keep your credit score as high as possible, increasing your chances of securing that mortgage, line of credit, or new credit card you’re about to apply for.
At iLending, we can help you ease the financial burdens associated with your existing car loan. As the national leader in auto loan refinancing, we’re able to achieve an average monthly savings of $144 for our customers. We’re able to offer extremely competitive terms that other lenders often can’t meet due to our best-in-class process and our extensive network of strategic partnerships.
You’ll benefit from our exclusive You First Approach™ to car loan refinancing. You’ll have a dedicated personal loan consultant who will get to know you and understand your specific goals. Your personal loan consultant is available to answer any questions you may have throughout the process. iLending will compare rates from a wide range of sources, including local community and nationwide lenders, and we’ll evaluate a variety of protection tools that will help meet your goals. Once we’ve identified the best solutions, we’ll review your options with you and help you make the right decision. Our team will then complete all paperwork for you and follow up to ensure you’re happy with your new car loan.
Our You First Approach™ takes the hassles out of car loan refinancing while providing you with a great experience from start to finish. Most importantly, it helps you unlock greater financial savings that can put a significant amount of money back into your monthly budget.
Refinancing your car loan has never been easier than with the exclusive iLending approach. Start the refinancing process today.