3 Indicators That Now is a Good Time to Refinance
Some bills can’t be changed. For other bills, though, a little legwork can make a big difference in your monthly payment. Your car payment is a great example. Refinancing your vehicle loan can lead to a lower monthly payment, a shorter payment term or both! It depends on various factors, including the value of your vehicle, how much you owe and your credit standing.
Read on for three common life changes that might mean it’s a good time to refinance your vehicle.
- Your credit rating improves. The biggest factor determining your auto loan status is your credit score. When your lender builds a loan package, they pull a credit report as a central part of that process. That number determines your interest rate, whether you’ll pay an insurance premium and what other fees your lender might charge. A boost in your credit score can result in a less costly loan.
- You didn’t shop around initially. Many people feel rushed through the car-buying process. They choose a car, and then are told the price, the monthly payment and everything else. Dealers usually have a smaller range of lenders with whom they exclusively work. Do your own comparison shopping. Dealer rates can be 1 to 1.5% higher than those offered at smaller lenders, like credit unions.
- You need to change your monthly payment. Your financial situation may have improved since you bought the car and you can now afford to pay more per month. You’ll save money in the long term by doing just that. Shorter-term loans usually have lower interest rates. Also, you’ll pay off the overall balance on your car faster. If money is tight, consider refinancing for a longer term. Although you’ll pay more in interest, you’ll reduce your monthly payment and save the money you need now.
You can talk to a Stanford FCU representative to see if the right time to refinance your auto loan is now.