At Wasatch Peaks, we’re here to help with every need you might have in the auto loan world. With fantastic interest rates and programs available for all vehicle types, we can help you get the funds you need to drive the car of your dreams.
One area many vehicle loan holders can often benefit from is looking into refinancing their current vehicle loan, which we’re happy to help with, even if the loan isn’t with us. We prepare your loan documents for you, plus even go the extra mile and pay off your current loan balance with another institution. Why you want to consider refinancing, and when are the right times to do so? Let’s go over this and some other tips we can offer in this area.
There are a few good reasons you might want to refinance an auto loan:
- Lower interest rate: There are several reasons why you may have ended up with an exorbitant interest rate on an auto loan, and refinancing can help lower it. This is particularly true if your credit has improved recently.
- Lower payments: A refinance can also bring you lower monthly payments, generally through extending the life of the loan. If you have had changes in your budget recently and need lower monthly payments, refinancing can help lower your monthly amount even if your interest rate remains the same.
- Changing loan term: Lengthening your loan term isn’t the only option – you can also shorten it while lowering the interest rate, helping you pay the loan off and own the vehicle outright faster than you would have otherwise.
When to Refinance
There are a few situations where you might be in a good position to refinance:
- You’ve recently improved your credit score, your job stability or your income since you took out your auto loan.
- You’ve been making on-time payments for over a year with no issues.
- Your current loan is a simple interest loan with no prepayment penalties.
- You took your original auto loan directly from a dealership (rates tend to be very expensive at dealerships).
- Interest rates on the auto loan market have dropped significantly since you took out your original loan.
When Not to Refinance
On the flip side, you might want to avoid refinancing in these situations:
- Your credit score, job stability or income have gotten worse since you took out your original loan.
- The vehicle has been damaged since you took out your loan.
- Market interest rates have gone up significantly.
- Your current loan balance is higher than what the car is currently worth
Some other basic areas to consider when refinancing your vehicle:
- Check with your current lender to see if they may lower your rate without refinancing, which is sometimes possible.
- If you plan to refinance in a way that will pay off your loan sooner than originally anticipated, make sure you’re aware of any prepayment penalties that may come into play.
- Unless absolutely necessary, try to avoid refinancing into a longer term, which will increase your total costs over the life of the loan. We know this is an unavoidable situation sometimes, however, and may fit your situation better.
- Before refinancing, check your credit score and take steps to improve it if needed.