Refinancing Your Auto Loan is Quick & Easy
Refinancing your auto loan may be the perfect solution if you are looking to save money each month and/or payoff your loan faster. It’s a quick and easy process that could instantly put more money back in your pocket. Don't know where to get started? We put together this informational guide to help you decide if it’s right for you.
What is Auto Loan Refinancing?
When you originally purchased your vehicle, you probably financed it with a loan from the dealership or another financial institution. Refinancing your auto loan replaces your current loan with a new loan at another financial institution; you are simply switching it from your current lender to a new one.
Typically auto loan refinancing is done to save money by lowering your payment every month, but there are actually several reasons you might consider switching your auto loan to CAMPUS.
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, if 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 experiencing 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
Auto loan refinancing is a simple process. Bring your current auto loan paperwork, including the payoff amount, to the credit union. Once reviewed and approved for the auto loan refinance, the credit union will pay off the loan with your current lender and file a new lien on your vehicle title. Some documents you may be asked to provide include:
- Driver’s License
- The Vehicle Identification Number of the vehicle in which you are refinancing
- The current vehicle registration
- Your current loan information – including loan balance, term, and the interest rate
- Name and phone number of your current lender – they will need this to request a payoff quote
- Proof of auto insurance
A new loan will be created at the credit union, which will include your new payment and payment schedule. The entire process takes very little time and could help you save money each month going forward.
CAMPUS Can Help!
If you’re ready to put more money back in your pocket each month by refinancing your auto loan, we’re here to help. Stop by any service center location, apply online, or give us a call at 1-800-367-6440 to get started.
By Campus USA at 28 Sep 2020, 14:03 PM