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Publish Date - May 23, 2022

Author: Greg Thibodeau

Categories:   Auto Loans & Financing    Refinance To Save   

8 Benefits of Refinancing Your Auto Loan

The cost of financing an auto loan can be a sizable part of your debt. Your loan should work for you and help you achieve your goals. What can you do if your loan isn’t working as well as you thought it would? Do you have any options if your situation has changed and your current loan is no longer a good fit?

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The cost of financing an auto loan can be a sizable part of your debt. Your loan should work for you and help you achieve your goals. What can you do if your loan isn’t working as well as you thought it would? Do you have any options if your situation has changed and your current loan is no longer a good fit?

Refinancing your auto loan might be a good option to get you back on track. What this essentially means is getting a new loan to pay off what you still owe on your old debt. Refinancing isn’t always the best choice and there are sometimes fees attached, but it might still be worth it if. If you can take advantage of some benefits to financing, what you stand to gain might greatly outweigh what you can lose.

1. Take Advantage Of A Lower Interest Rate

The interest rate will have a large impact on the amount of interest that you pay. Since the interest rate fluctuates it’s possible that it might be lower now than it was when you obtained the loan. You might also be able to refinance your loan at a lower rate if your financial situation has improved.

Lowering the interest rate on your loan by as little as 1% can mean a fair bit of savings. A lower rate may mean lower monthly payments or paying the loan off earlier. You will be paying less interest overall and keeping more money in your pocket.

2. Improve Your Bargaining Position With A Better Credit Score

Your credit score represents how risky it is to lend you money and it will affect the cost of financing your loan. If you had poor credit, or no credit, when you secured your loan you could be overpaying now. Your credit score may have improved and you might be eligible for a better rate.

As long as you have been making your payments on time you have been building credit. By making timely payments for 6 to 12 months you can build enough credit to lower your interest rate. Staying on top of all your other debts and improving your financial situation can help improve your credit score too.

3. Negotiate A Better Rate

A portion of your APR are the fees charged by the financial institution which grants you the loan. Not all financial institutions are the same. If you didn’t shop around when you first secured your loan, refinancing may be a second chance to do that now.

4. Pay Your Loan Off Faster

If you can afford to pay larger monthly payments you can finish paying your debt off earlier by shortening the term of your loan. It’s a good idea to go with the shortest term that your budget can handle because shorter term loans get lower interest rates. This means less interest that you have to pay over the life of the loan and more money that you get to hold onto.

Perhaps your situation has changed and you are in a stronger financial situation than you were when you got the loan. Or maybe you underestimated how much you can afford. Whatever the reason, refinancing your loan can give you the opportunity to shorten the term, pay your debt off earlier, and save some money.

5. Borrow Less

It’s generally a good idea to divert savings to paying off your debts. This usually means paying less interest overall and saving yourself some cash. If you have managed to set aside some money since you obtained your loan it might be worth considering using your savings to pay off your car loan.

You may be able to make extra payments on the loan you have without penalty. In some cases it is better to refinance the loan for a new one with a smaller principal amount. Read over the fine print of your loan and figure out which option will give you the best savings.

6. Lower Your Monthly Payments

Refinancing your auto loan may be a good option if you have been struggling to make your payments on time. Don’t risk your credit score by allowing your debts to go unpaid. You may be able to extend the term of your loan and lower your monthly payments.

Refinancing your loan at a longer term means you will be paying longer for your loan. It can also mean a higher interest which translates to more money you will have to pay over the life of the loan. But a loan with a longer term can have significantly lower monthly payments which can alleviate financial strain.

7. Get Money For An Emergency

Life is full of surprises, unforeseen circumstances, and unexpected events. If you are dealing with an emergency and are in dire need of cash, look at all of your borrowing options carefully. Don’t forget to consider that refinancing your auto loan can be a good choice too.

If your car is worth more than you owe on your loan you might be able to use a refinanced loan to deal with a financial crisis. With a cash out refinancing loan you can tap into the equity you have built into your vehicle and borrow more than you previously owed. You will have to pay back the loan but it’s money that you can use now to get out of a jam.

8. Change The Names On The Loan

When you’re refinancing a loan you will be signing new paperwork and that’s the best time to make some changes. This is the ideal opportunity to change the names on the loan. Removing a cosigner or adding a payee is much easier when you’re signing a new agreement.

If you feel that refinancing may be a good option for you, take the next step and learn what offers you can get. myAutoloan can help you learn what is available to you in just a few simple steps from the comfort of home. Take advantage of refinancing your auto loan and make your financing work harder to help you reach your goals.