Refinancing is a process in which you go through the financing process again, usually to get a better interest rate or to lower your monthly payments. If you have better credit, if the market is low, or you simply need to save more each month, refinancing might be the right option for you. Although there are often some stipulations, most car shoppers should consider refinancing within the first few years of ownership.
When Should I Refinance? There are two reasons to finance: things are better than when you bought your car or you’re having difficulty making ends meet. In the former situation, many refinance when interest rates drop and the market improves, or if your credit score improves drastically. You may also want a new rate if you didn’t get the best rate when you originally bought your car, or if your lease is expiring and you want to purchase the car you’ve been leasing.
Additionally, you should speak to your lender if you are having trouble making monthly payments. If you’ve had a financial setback, some lenders allow you to refinance. You’ll have higher rates than before and a longer contract, but that’s better than missing payments.
Requirements for Refinancing Not everyone can refinance their loans. Some lenders avoid refinancing when your credit has deteriorated drastically or if you owe significantly more than the car is worth, one reason it’s better to consider refinancing early on. Also, if the car is more than seven years old or if you owe more than $40,000 or less than $7,500, most lenders will keep you at original rates.
You should also read your original loan paperwork, as there are often penalties for paying off a loan early. This could reduce the amount you save when refinancing.
Most auto loans are designed so that you pay off interest in the first half of the term of the loan, which means you should refinance sooner rather than later. For more information about refinancing or to speak to a financing expert, come by Pollard Used Cars in Amarillo today.