Refinancing a car loan is only worthwhile if you’re able to benefit from the process. For most people, this benefit involves saving money and in order to save money with car loan refinance, you need to be able to lower your interest rate. But what if you’re unable to get a better interest rate? Is refinancing still worth it?
The answer to this question depends on your specific goals. In some instances, you still may want to consider refinancing even if you can’t lower your interest rate.
There are a variety of factors that may prevent you from getting a lower interest rate when you refinance a car loan:
Market interest rates will play a role in the specific rate a lender will be able to offer you. If you purchased your vehicle at a time when market interest rates were very low and rates are currently rising, it’s possible that you may not be able to lower your rate by refinancing. In this situation, you may want to wait out the spike in interest rates and refinance once they start to go down again.
Your credit score is one of the biggest factors impacting your interest rate. If your credit score has dropped since you purchased the vehicle, you may have a hard time lowering your interest rate. There may be a variety of reasons why your credit score has dropped recently, including:
In this situation, you may want to take steps to raise your credit score before refinancing, since this may help you secure a lower interest rate.
In some instances, vehicle manufacturers will offer incentives to boost new car sales. One common incentive for individuals with excellent credit is to offer a very low promotional interest rate. If you took advantage of this incentive when you purchased, it’s possible that refinancing may not be able to unlock a more competitive rate than the special promotion you received.
There may be certain instances where you determine that refinancing your car loan now is still beneficial, even if you’re unable to get a lower interest rate:
If you’re struggling to pay your bills each month, refinancing your car loan at the same interest rate, but a longer loan term, will help you lower your monthly payment. This can free up additional cash in your monthly budget, making refinancing worthwhile. Just remember that you will end up paying more money in interest over the lifetime of your loan in this scenario.
In most situations, you’ll be able to skip one or two payments when you refinance. This is because the process of paying off your existing loan and opening a new loan typically takes 30-45 days to complete. During this time period, you won’t owe payments to your existing lender and your new loan will not be ready for processing payments.
If you are experiencing significant cashflow issues and having a month or two without car payments would help you catch up on bills, pay for an expensive home repair, or provide any type of significant financial relief, it may still be worthwhile to refinance at the same interest rate.
Some people just truly hate doing business with their current lender. Whether you’ve experienced poor customer service, question their record keeping, or have some other issue with them, refinancing with a new lender can help eliminate these frustrations.
It’s still important to crunch the numbers in this situation to make sure you’re not losing money simply to avoid working with a lender you hate. But if refinancing with a new lender at the same interest rate is essentially a wash financially and it will reduce your monthly stress levels, it may be worth considering.
If you’re struggling under the onerous terms of a bad car loan, it may be time to refinance. iLending’s exclusive You First Approach™ makes car loan refinance easy and hassle free.
Our approach pairs you with a loan consultant who will work closely with you to understand your refinancing goals. This information will guide the entire process. Your loan consultant will shop for loan options for you using our vast network of over 50 nationwide lenders, and the best solutions to address your goals will be reviewed with you in detail. You’ll have the ability to ask your loan consultant any questions you may have to ensure you fully understand your options.
Once you’ve identified the best loan to achieve your goals, our team will handle the entire process for you. This includes filling out all the paperwork and following up with the existing lender to ensure your current loan is paid off properly. Our You First Approach™ gives you peace of mind that every step of the process is handled correctly and you receive the best loan terms for your unique needs and goals.
On average, iLending customers save $143/month when they refinance a car loan with us. This monthly savings can benefit you in many ways, providing the additional money in your monthly budget to pay off debt, build up your savings, or simply have extra breathing room to pay your bills comfortably.
Apply now to get the car loan refinance process started.