Refinance Your Auto Loan: Is It Right For You?
It’s Quick & Easy to Refinance Your Auto Loan
Refinancing your auto loan is the the perfect solution to lowering the total interest you pay over the life of your loan, lowering your monthly payment, shortening the term of your loan, or all of the above! It’s a quick and easy process….trust us, we are auto loan experts!
Let’s review what auto loan refinancing is and how to decide if it’s right for you.
What is Auto Loan Refinancing?
Refinancing your auto loan may sound complicated, but the process should be very simple for the consumer. When you originally purchased your vehicle, you probably financed it with a loan from the dealership or another financial institution. By refinancing your loan, you are simply switching it from your current lender to a new one.
Typically auto loan refinancing is done to save money, but there are actually several reasons you might consider switching your auto loan to the credit union.
Why Would You Choose to Refinance?
The most common reason to refinance your auto loan is to take advantage of better loan rates. If loan rates have decreased since you originally purchased your vehicle, refinancing gives you the option to take advantage of the lower rates and pay less interest on your loan. Or, perhaps your credit score improved and you qualify for better rates. Both these options can help you save money each month and over the life of your loan.
For example, imagine your auto loan balance is $25,000 and your current rate is 6% APR. With a term of 60 months, lowering your interest rate by just 2% could save you a significant amount of money.
Current Auto Loan
Rate = 6% APR
Monthly Payment = $483.32
Total Interest Paid = $3,999.20
Refinanced Auto Loan
Rate = 4% APR
Monthly Payment = $460.41
Total Interest Paid = $2,624.78
By refinancing, you could save $22.91 per month and $1,374.42 in interest over the life of the loan.
Other reasons to consider refinancing your auto loan include:
- Paying off the loan quicker
- Gaining more immediate financial relief
Both these options focus on the term or length of your loan. By shortening the loan term, you will pay off the loan quicker. Your monthly payments will be higher, but you will be able to significantly cut down on the total interest paid over the life of your loan.
In order to gain more immediate financial relief, you may consider extending the term of your loan. This option helps lower your monthly payments even more, but should only be considered if you’re having financial challenges.
When you extend the length of the loan, you risk the loan amount being more than what the vehicle is worth. This results in negative equity or being “upside down” on your loan. Most lenders will not allow this situation to happen. However, additional temporary options may be available if you’re experiencing financial hardships.
How Refinancing Works
Refinancing an auto loan is a simple process. Apply online or over the phone for the loan payoff amount. Once approved, you will provide your current auto loan documentation, including the payoff amount, title information, and insurance verification. We will take care of paying off the loan with your current lender as well as all of the title work.
If you are interested in seeing if refinancing your auto loan from another lender at CAMPUS could help you achieve your specific goals, you can call us at 800-367-6440 and press 4, chat with us on our website during our business hours, or email us at info@campuscu.com.
To apply online for a loan at CAMPUS USA Credit Union, visit: https://www.campuscu.com/get-started/
By Campus USA at 14 Jan 2020, 15:20 PM