Refinancing an auto loan is a great way to reduce the amount of money you spend every month. By cutting your interest rates and potentially spreading your payments over a longer period of time, you can get some much-needed breathing room.
Here are some signs that you might want to refinance your auto loan.
1. You Can't Afford Your Current Payments
Many people opt to refinance their auto loans after a significant life change. Perhaps your job is no longer in the area or you've retired. As a result, you've experienced a reduction in income and it's hard to afford all of your bills, including your car loan payments.
By refinancing, you can get a new rate that reflects your current financial situation. You can also try lowering your amount financed to help stretch out your payments and reduce the size of each bill you need to pay.
2. You're Almost Done With Your Loan
This may seem counterintuitive, but if you have six months left on a loan and you really can't make those payments, you could spread them out over 24 months or 48 months again. While you'll be paying for longer, you'll have much better cash flow during those months.
3. Your Credit Has Vastly Improved
Perhaps you took some time to improve your credit by paying off any outstanding debts. With better credit, you might be able to get a much lower interest rate than before. You can use this new lower rate on your current loan or apply it to an entirely new one if the terms are better.
Often, getting a better interest rate is going to improve your overall financial situation. For instance, if you want to get a mortgage, it will lower your debt-to-income ratio so you can qualify for a larger home, or so that you can qualify at all.
4. They Are Offering a Great Rate for Refinancing
Sometimes, you can refinance your loan and lower your rates significantly. Refinancing companies might be offering you a great bonus, such as money back on your loan, or a really low introductory rate. So, pay attention to deals that come up if you're already thinking about refinancing. It's possible that you could save a lot of money during a sale.
The only way to find out how an auto loan refinance can help you is to get a rate quote. Contact a refinancing company and ask them what they can do for you.