How do I refinance my car loan and save?
10/30/2024
Refinancing your car loan has a few different uses and can dramatically change your daily budget.
One main reason to refinance is to secure a better interest rate. If you keep the same terms as your previous auto loan, and only lower the interest rate, you could save a lot of money over the remaining life of your auto loan. For example, if you refinance from an 8.5% interest rate to a 5.5% interest rate on a $30,000 auto loan with four years remaining, keeping everything else the same, you could save an estimated $42 each month. That is $2,016 in total estimated savings!
Situations that may lead to better interest rate opportunities:
Interest rates increase and decrease throughout the year. If you bought a vehicle when the interest rates were higher, you may want to take advantage of better interest rates when they come along.
Not every lender is the same. Some dealerships and financial institutions will offer better interest rates and terms than others. If you have a loan with a different lender, and realize later on that MembersAlliance has a better offer, refinancing allows you to make the change and save a bunch of money.
If your credit score has significantly improved since you got your loan, this may also open the opportunity to lower interest rates that were not available before. That is where refinancing comes in.
Refinancing pays off the previous loan with a new loan. This allows you to change the interest rate or loan terms that may be more favorable to your current financial situation.
Lowering the monthly payment:
Changing the interest rate is not the only reason someone might want to refinance. There are times when unexpected expenses arise, or income changes that make it difficult to keep up with the regular payments on an auto loan. Refinancing can be used to lower the monthly payment by extending the term. In some cases, this may increase the interest rate but still fits the needed monthly payment into an adjusted budget.
Other considerations:
It is important to know if your current lender will charge any early payoff fees, and what the new lender may charge for refinancing. This may change your total estimated savings, but if your savings is greater than the cost of refinancing it may be worth securing those savings.
Not every lender has this option, but at MembersAlliance we offer auto loan modifications. That means if you already have an auto loan at MembersAlliance and a better interest rate is available, we can save you the cost of a refinance and lower your interest rate.
If you would like to look at your refinancing options and find out how much you can save, you can apply online or visit one of our branches to talk with a Loan Officer today.