You’ve purchased a car, but now the terms don’t seem as favorable to you as they did in the beginning. If your monthly payment or interest rate is too high, it could be time to refinance your existing loan. Refinancing can mean lengthening the term of your loan, or it could mean lower interest rates. Here are three reasons to refinance your vehicle loan.
1. Interest Rates Have Changed
Interest rates aren’t static. They change periodically, and sometimes that means they decrease. When interest rates improve, you can consider refinancing.
Refinancing to get better rates helps you save over the loan’s length. Remember, sometimes, a financial institution can offer better rates than a dealership. Shop around for the most competitive rates and confirm your ability to decrease your monthly expenses by refinancing.
2. You Need a Lower Monthly Payment
Sometimes when you initially finance a vehicle, the rates aren’t the best, but you take what you can get to be able to get into the new car. Over time, your monthly payment can cause you to struggle to pay your other bills. Refinancing the loan for a longer term could make your payments more manageable each month.
It’s important to remember that lower monthly payments can help immediately, but refinancing for a longer term means you will be paying for the car longer than originally planned. Your car’s value will continue to depreciate, but you will be stuck paying for the vehicle. Reducing your monthly payment can seem like a good option, but it may be beneficial to consider increasing your payment as your situation improves.
3. More Favorable Loan Terms
Another reason people refinance their car loans is that their financial situation has improved. For example, if their credit score has improved, they can get better terms such as lowered interest rates. More favorable loan terms create easier payment plans and help you to continue improving your credit score.
At times it can be beneficial to refinance your automobile loan. When your financial situation has improved, refinancing can help you continue to improve your credit score as well as your ability to continue to make your payments on time. When determining whether to refinance your car or not, consider the long-term effects as well as the short-term benefits. Contact FinleyFI Solutions to learn more.