Ever thought about refinancing your car loan at a lower interest rate?
This is a quick and painless way to shave dollars off your monthly bill and hundreds of dollars off your total interest paid.
Plus, the entire process can be easy. So, if it’s that simple, why aren’t more people doing it?
One reason is that the difference in your monthly payments once you refinance isn’t nearly as significant as it would be with a home mortgage, since the amount borrowed is less, and car loans are shorter-term loans.
But even so, with interest rates on used cars hovering around 6.6%, an auto refinance might be worth your looking into, particularly if you’ve seen a significant improvement in your credit score since you took out your original loan, or if you didn’t shop around for the best rate on financing the first time.
You might not think knocking a few percentage points off your rate matters much, but it does. Let’s say you originally secured your loan with a 16.4 percent interest rate. If you have a higher credit score now, and thus can get a better deal, you’ll save plenty. So, hypothetically, if you can refinance to a 10.13 percent rate, you’d save $64 a month and more than $3,600 total.
Use the SDFCU auto loan cost calculator to discover how you may be able to lower your monthly car payments by refinancing your auto loan.
If that got your wheels turning, here’s how you do the deal:
- Understand your back story. There are a couple of reasons why your current interest rate might be higher than it should be. The first we already talked about – your credit score. The second, though, is that if you originally financed your car through a dealer, the rate may have been inflated. That’s why it’s important to shop for the right lender this time around when refinancing your auto loan.
- In the months leading up to you application for a loan, keep in mind that your credit score will directly affect your interest rate. So, be extra careful about paying your bills on time and keeping credit card usage to a minimum. Also, don’t close old credit cards you’re not using right now. These actions will help make sure your score doesn’t drop before you apply.
Credit monitoring - SavvyMoney® is a free digital resource available to SDFCU members that helps you get quick access to your credit score in online banking and the mobile app.
If you are interested in refinancing, read about our auto loans.