Refinancing an auto loan is not a bad idea, as it can provide borrowers with a lot of benefits. But knowing when to refinance can be just as important as applying. There are many reasons why someone would want to refinance an auto loan, and MaxCash wants borrowers to know when it may be a good time to start the process.
Getting Lower Interest Rates is a Great Reason to Refinance
If you financed your vehicle and feel that you could have gotten a better interest rate, then refinancing could be a good move. You can attempt to get a better loan any time you want—even before your first loan payment!
Refinancing an auto loan so quickly can be problematic though, as doing so will generate a hard inquiry on your credit report—leading to a lowered credit score. It might be wise to spend some time researching lenders before refinancing so your credit score has time to bounce back.
It’s also worth considering the amount you owe compared to the value of your vehicle. Banks and finance companies are less inclined to refinance an auto loan if the vehicle isn’t worth at least as much as the loan.
However, if you did find a financial institution willing to help you refinance, then they are doing so at considerable risk. Because these companies are taking such a risk, your interest rates could be affected.
Improved Credit Score Can Be a Reason to Refinance
All those months of paying your loan back on time can have a positive effect on your credit score. Lenders see a good credit score as a sign of a reliable borrower, which can lead to receiving better interest rates.
If your credit score has improved since you first took out your auto loan, then refinancing might be able to save you money. For example, refinancing a $15,000 car loan with a 7% rate to a 5% rate could save you around $800 in interest.
An Improved Financial Situation is Another Reason to Refinance
If you have improved your credit or have better income then when you first got your loan, refinancing is a great option for you. By increasing your credit and lowering your debt-to-income ratio, you might be eligible for more favorable terms when you refinance.
If you want to know more about refinancing a loan, or just want more knowledge on the different types of loans available, then please check out our blog. We provide financial information and resources on several topics and queries.
Refinancing Can Be Great if You Want to Change Your Loan Term
Another great time to refinance is when you feel your payments are too high. If you need a lower monthly payment, extending the loan term is a great way to do just that. By simply extending an auto loan from 48 months to 60 months, you could save hundreds in interest payments.
This also works is reverse, too. By reducing the term of your loan, you’ll increase your monthly payments while simultaneously reducing the amount of interest you pay overall.
At MaxCash, we want to help you get the best deal on your refinanced auto loan. Though, we don’t lend money directly, we work with a large network of reputable lenders across the country. We may be able to help you find a compatible lender in no time!
If you wish to contact one of our representatives, feel free to call any day of the week—even Saturday and Sunday! Call toll-free at (833) 207-9052 or send an email to info@MaxCash.com.