Most people know they can refinance their mortgage, but less than half are aware that they can also refinance their vehicle loan, according to a Harris Poll study for Ally Financial. It’s a simple task that can reduce your car payments by about $1,300 a year.
The following considerations can help you determine if refinancing your vehicle loan is the right step for you.
• Interest Rates: Can you lower your monthly costs by reducing your rate? Compare your current interest rate with the advertised ones. Keep in mind that several aspects of your financial history may have impacted your interest rate for a loan, including credit score and credit history. If your credit score has significantly increased since you financed your vehicle, it may be time to refinance for a lower interest rate.
• Tight Monthly Budgets: If you need to create space in your budget due to changes in life circumstances or simply want to save more money, refinancing your vehicle loan is a measure that can have a substantial impact on your finances. For example, those who refinanced their vehicles through Clearlane, Ally’s online auto financing platform, reduced their monthly payments by an average of $112.
• Reducing the Term: Another reason many choose to refinance is to reduce the number of installments they will have to pay, with the goal of decreasing the total interest paid over the loan. This may appeal to you if you can now afford a higher monthly payment than when you purchased the vehicle, thanks to a salary increase or new source of income.
If you choose to refinance, be sure to review your loan agreement and terms to ensure you understand your current loan. You should also be aware of any costs that may be incurred by refinancing or changing the terms of your loan.
Source: StatePoint