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Is It Good To Refinance Your Car Loan

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When Should You Consider Refinancing Your Car

Should You Refinance Your Car Loan?

Refinancing a car isn’t for everyone and deciding when to refinance can be challenging. The benefits of refinancing might be limited or non-existent in certain instances. For example, if you have a poor payment history on your current loan or are close to paying it off, it may not be to your advantage to refinance.

However, there are times when refinancing your car can benefit you. Consider refinancing your car if any of the following situations apply to you.

Your credit score increased

Your credit score is one of the main factors a lender considers when determining loan approval and credit terms. If you financed your car with a low credit score, refinancing your car could get you a better interest rate or even reduce your monthly payment

Interest rates have dropped

If you bought your car when interest rates were high, refinancing your vehicle can save you money, possibly more than you realize. An interest rate decrease of only 2% to 3% could save you hundreds if you do not extend the term of your loan. An auto loan calculator can show you how interest rates affect your monthly payment and the total amount you could pay in interest.

You didnt shop around for rates initially

Your monthly payment is too high

Here Are Some More Details About Refijet

  • National network RefiJet connects people with a national network of financial institutions, giving you a chance to receive loan offers from multiple lenders.
  • Refinances more than just cars Lenders in the RefiJet network provide refinance loans for cars, motorcycles and other personal-use vehicles.
  • Not everyone can apply for prequalification To apply for prequalification, you must be employed or have a steady source of income. Youll also need to have a history of on-time auto loan payments, a vehicle thats no more than 10 years old and full-coverage auto insurance.

Refinancing A Car: What Are The Pros And Cons

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The benefits of refinancing your car loan can include lowering your monthly car payment, reducing the interest you pay or shortening your loan term.

The downsides to auto loan refinancing can include fees, additional interest if you extend the term or cash out equity, and the risk of owing more than the car is worth.

Here are the pros and cons to consider.

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Here Are Some More Details About Penfed Credit Union

  • Membership required You must be a member to qualify for an auto loan from PenFed Credit Union. Joining is easy, and you dont necessarily have to be a member of the military.
  • Large loan range PenFed Credit Union offers auto loans ranging from $500 to $100,000, depending on your loan term.
  • Doesnt refinance its own loans If you got your current car loan from PenFed Credit Union, it wont refinance your loan. The lender only refinances auto loans from other lenders.

How Does Refinancing My Car Loan Affect My Credit

Is It A Good Idea To Refinance Your Car Loan?

Refinancing your car loan will affect your credit but that doesnt mean you shouldnt consider it.

If you wish your current auto loan was more affordable, refinancing may be a good option. It can allow you to replace your current loan with a new loan and save a lot of money on interest over time. Refinancing may also leave you with lower monthly payments and free up your monthly cash flow.

It may be a good option if your car is retaining value, interest rates are going down, or your has increased. Refinancing may also make sense if youre short on cash flow, want to add or remove a co-borrower, or are worried about repossession.

Before you take the plunge and decide to pursue this strategy, however, its important to consider how refinancing a car loan affects credit. After all, good credit is the key to landing the best interest rates and most favorable terms down the road. You dont want to refinance and later find out that your credit score has taken a large, long-term hit.

2021 Auto Refinance Rates

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When Is It A Good Idea To Refinance A Car Loan

It makes sense to refinance a car loan under the following circumstances:

  • Your car is holding its resale value. Before applying to refinance your auto loan, check valuations from Kelley Blue Book, or the National Association of Auto Dealers to determine your car’s approximate resale value. If your car is worth less than what you owe on it due to age, mileage crashes or other issues, refinancing may prove difficult.
  • Interest rates are dropping fast. If changing economic conditions have significantly brought down the cost of borrowing, you may qualify for a new loan at a lower rate. The average interest rates on a new car loan in the U.S. was 5.76% in the fourth quarter of 2019, according to Experian datadown from the prior year. With Fed rates slashed to near-zero in 2020, it’s possible you’ll continue to see a greater difference in your new interest rate as time goes on.
  • Your credit score is higher. If you increase your credit score significantly in the 12 months or so after taking out a car loan, you may qualify for loan offers with better interest rates.
  • You need to cut expenses. Extending your car loan repayment period may make sense if you need to reduce monthly expenses, even if it means paying more over the course of the new loan.

Why Might I Refinance My Car Loan

If youre still on the fence about refinancing your car loan, here are a few benefits to consider:

  • You could reduce your repayments. Better interest rates may be available and refinancing can help you reduce the total interest over your loan term.
  • You could make your balloon payment more manageable. If you are currently paying off a balloon scheme loan, you will have to cover a lump sum when your loan ends. Refinancing can allow you to pay off your balloon payment over an extended period if you arent able to pay the lump sum.
  • You could sign up with a better lender. Not all lenders are created equal. Some offer discounts on other products when you sign up for a car loan, better customer service, easier account management and add-ons that may not have been available with your previous lender.

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You Hate Your Current Lender

Many people choose to refinance simply because they dont like the way their current lender does business. Rude customer service reps or poor record keeping can really sour a relationship with a lender. If you really cant stand your current lender, refinancing with a new lender may help alleviate some of your frustrations.

Is Refinancing Your Auto Loan Worth It

How the pandemic is making it easier to refinance your auto loan | ABC7 Chicago

Refinancing your auto loan is worth doing if it can save you money. Every car payment you make at a higher interest rate than you deserve is a waste of money. Even if you stay at the same rate but refinance to a longer term, a lower monthly car payment could help alleviate budget pressure. But be aware that if you do lengthen your loan, you may end up paying a lot more in interest in the long run. Read about the common refinance mistakes that people make so you can avoid them.

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You Can Lower Your Monthly Payment

Refinancing can reduce a monthly car payment thats too large for your budget. A lower payment can free up funds to pay off other, higher-rate debt. It can also help you through times of financial difficulty, like a sudden drop in income.

Refinancing to a lower interest rate will lower your payment some, and can help you avoid falling behind on payments. But to see a significant payment reduction, you will need to extend the term of your loan, which will probably mean paying more in interest over the life of the loan.

Youre Worried About Repossession

If youre falling behind on car payments, your lender may repossess or take back your vehicle. To reduce the risk of this, you may want to refinance. You can apply for a longer loan term and get a lower monthly payment you can afford. Refinancing can mean the difference between keeping your car and having your lender take it away.

Compare Auto Refinance Rates

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How Can You Refinance An Auto Loan

Each lender has its own process and requirements for refinancing auto loans. However, the steps to refinance are generally similar to taking out an initial car loan. Heres what the refinance process looks like:

  • Check your credit report. Fixing any errors on your credit report may help raise your credit score. Lenders largely determine the rate you receive based on your credit, so any improvements to your credit will lead to lower rates and bigger savings on your loan in the long run.
  • Gather documents and information about your existing loan and your current vehicle.
  • Shop refinance loans at multiple lenders and get preapproved. Include online lenders, big banks, credit unions, and community banks in your search. Any lender with competitive rates and fees is worth consideration. Remember, credit inquiries within a 14- to 45-day period count as a single inquiry on your credit report.
  • You Want To Remove Or Add A Co

    How to Refinance Your Car Loan and When It is Beneficial ...

    To remove or add a co-borrower from your car loan, youll need to refinance it under the name of the person youd like on the loan. You may have a co-borrower if you were unable to get approved for a car loan on your own.

    If this holds true and youve built up or improved your credit history, it may be time to remove your co-borrower through refinancing.

    Also Check: Oneaz Auto Loan

    Things To Watch Out For When Refinancing A Car Loan

    Just like with any financial arrangement, it is important to keep your eyes out for red flags. Ensure that the lending agency is reputable and offers a reasonable interest rate. Make sure that you are dealing with a proven institution and be sure to read all the fine print. If you are unsure as to the meaning of a phrase, it is better to ask.

    Take a look at the cost of refinancing the vehicle. Are there any upfront expenses? Are you going to be paying more down the line? If so, how much more? Make sure that you have all of the information above before making your decision. As always, avoid deals that seem too good to be true. Understand your rights and the responsibilities of the lender. Be certain that you are comfortable with the arrangement and that it is in your best financial interests.

    Is The Time Right To Refinance Your Car Loan

    Interest rates are still hovering near historic lows for mortgages, but did you know that those same super low rates also may make it wise to refinance your car loan?

    You may have heard of refinancing a mortgage but did you know you can also refinance a car loan? If you decide to refinance, you may save money in a number of ways.

    • Your current interest rate is high. When you first bought your car, you may not have qualified for the best rate. Or, since you originally took the loan, your credit score may have improved, entitling you to a better, lower rate. In some cases, rates in general may be lower and can be applied to your balance.
    • You want to lower your monthly payments. A lower interest rate can reduce your monthly payments without increasing the term of the loan.
    • You want to pay your loan off sooner. If you qualify for a lower interest rate, you can continue to make the same monthly payments and pay off the loan faster than you originally planned because more of the monthly payment will be applied to principal.

    Sounds great, right? For some people, it’s a beneficial financial choice. One way to decide is to use a calculator tool to estimate your potential savings.

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    Auto Loan Rates Vs Mortgage Rates

    A cash-out refinance involves taking out a new mortgage for more than your outstanding balance. You then pocket the difference between the new and old loans.

    If you recently took out an auto loan, its likely that the interest rate is identical, or even slightly lower, than the rate for a cash-out mortgage.

    In 2016, the average rate for new vehicles was in the low four percent range, and for used cars, the high four percent range.

    At the moment, the average rate for a conventional 15-year fixed mortgage is just about four percent , and its around 4.5 percent for a 30-year fixed mortgage.

    Even if auto loan rates climb to 4.5 percent and 5.2 percent this year, which some experts are predicting, its unlikely youll save money by paying off a car loan with a cash-out refi, especially when you factor in the closing costs associated with new mortgages.

    For cash-out mortgages, closing costs typically range from three to six percent of the loan.

    Keep in mind, too, that while most houses rise in value, the value of automobiles always depreciates usually quite fast.

    So if you obtain a new 15- or 30-year mortgage to eliminate the car loan, youre financing a depreciating asset by taking out equity from an appreciating asset.

    Understanding The Pros And Cons Of Refinancing Your Car

    How to refinance your car loan

    In every situation, it is up to you to determine which scenario is best for your needs.

    Work with your lender to request a quote. Gather information about the costs involved in the process. Then, consider both the pros and cons of refinancing your car.

    Could it help you save money or make your debt easier to repay over the long term?

    For many people, a car refinance offers a bit of freedom, enabling you to pay off other debts. It also gives you a fresh start with a new lender.

    Theres no risk in obtaining a car refinance quote to find out how you could benefit.

    Recommended Reading: Genisys Auto Loan Calculator

    Nerdwallet’s Best Auto Loan Refinancing Lenders Of September 2021

    Three Questions To Ask Before Refinancing Your Car Loan

    1. Is there a prepayment penalty for paying off my existing car loan early?

    Although its rare prepayment penalties still exist. Youll need to crunch the numbers and see if its still beneficial to refinance.

    2. Have I waited too long to refinance my auto loan?

    Rates are typically the lowest for new vehicles. If the majority of your interest and principal is paid off, there may not be enough savings in it to make it worth your while.

    3. Did my credit score change for the worse?

    If it is too low to be approved for financing that includes a lower interest rate, you should hold off on refinancing your car loan.

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    Where Can I Refinance My Current Auto Loan

    You can refinance your auto loan by visiting your local OneAZ Credit Union branch. If you do not have time to visit a branch, you can request an appointment with a banker on your computer, phone or tablet, or call the OneAZ Virtual Team at to apply. Or to apply online in five minutes or less.

    In addition, you do not have to be a current member at OneAZ Credit Union to apply for a loan. to learn what it means to be a OneAZ member.

    Youre Underwater On Your Loan

    Should you refinance your auto loan?

    Finding a lender to refinance a vehicle when youre upside down on your loan isnt easy. Even if you can find a lender, it may not be the best move. The interest rate is likely to be much higher than average, and it will cost you more in the long run.

    When you refinance your upside-down vehicle, you add to the overall cost of the vehicle. One way around this is to pay the difference in cash so youre no longer upside down, then you can refinance at a lower rate. Even if it takes you a few months of making a few extra payments, it may be worth it in the long run. Alternatively, you could also take out other financing, like a personal loan or home equity loan, to help you cover the full cost of refinancing.

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