Refinancing a vehicle loan can serve a lot of different purposes. Luckily, it is also one of the simplest things to do. Simply apply with a bank or credit union and they handle most of the details of transferring the title into their name. Simple is great, but how do you know if refinancing is worth the effort? Here are some cases where you might want to consider doing a refi.
Your Credit Rating Has Increased
If your credit score has gone up by more than 20 points since you received your vehicle financing, a refinance might be worth it for you. In most cases, a refinance will not cost you any money and it could save you in a few ways.
First, it could lower the amount of interest that you pay. Even if you only receive a 1 percent rate cut, this could add up in a big way. On a 30,000 dollar loan, it would give you a savings of almost 1,000 dollars over the course of a year.
Second, it can save you money on your car payment. The amount that you pay on principal will remain the same, but your interest payment will be reduced. Lowering your monthly bills is always a good thing and could free up more money for paying off other debt or for savings.
You Financed At A Dealership
When you finance at a dealership, with their finance department, you never really know what you are getting. They give you a rate, but you never know if it is the best rate.
The reason for this is that dealers make money on every part of the sales transaction. They take a cut of everything, including the interest rate. A lender might have offered you a 5 percent rate, but the dealer will quote you 7 percent. The extra money goes into their pockets.
So, if you financed from a dealer, unless you got one of those incredible zero percent finance deals, you should consider a refi. It is free to get a quote, so you might as well do it.
You Need A Lower Payment
If your finances have changed, a vehicle refi could open up some room in your budget. Interest rate reduction aside, simply stretching out the term can accomplish this.
Here is an example. If you had a 30,000 dollar loan for five years at 5% interest, your payment would be just over 560 dollars.If you have been paying on that loan for a year, you have paid down the principal by around 5000 dollars. Refinance that loan for a new term of five years and cut your payment by 100 dollars a month.
You Need Someone Off The Loan
Situations change and you might need someone off of the loan. This might be because you had a cosigner and want to relieve them of their obligation or it could be due to a situation such as a divorce.
Refinancing your auto loan is a fast and easy way to get someone off of the loan. You might need to obtain a release from the person being removed, but it is well worth the trouble. In the case of divorce, it would be a good idea to handle this as soon as possible before too much equity is obtained in the vehicle.
You Want To Skip A Payment
If you are experiencing a minor financial hiccup, a refi could give you the time needed to get over it.
Perhaps you are starting a new job or need money to pay an unexpected bill. Whatever the case, if you need to free up some room this month, a refi may be able to help.
Most lenders will allow you to push your first payment off for up to 45 days. This time can be very beneficial, depending on your situation.
You Hate Your Lender
Sometimes, you might want to refi a vehicle simply because you are not getting along with your lender. Maybe their payment process is a hassle, they are charging fees that you did not expect or you just had a bad experience with customer service.
Moving your loan to a new lender could make your life easier or could allow you to just get away from a bad experience. If this is the reason for your refi, be sure to thoroughly investigate your new lender. You wouldn’t want to move from a bad situation to a worse one.
To Sum It All Up
There you have it, several reasons to refi a vehicle. If you identify with one of these six reasons, you should probably investigate a refi. With a minimum of effort, you could be able to solve a big problem or save a lot of money.