When is the right time to refinance a car loan? Well, one could argue that it’s never a bad time to consider a car loan refinance.
Too many people assume that their auto loan is something they are locked into from the day they finance a vehicle until the end of the loan. But not so! Many people are overpaying on their auto loans, paying higher rates than they’re eligible for, or otherwise stuck with terms that may no longer make sense for their lives. That’s where car refinancing can come to the rescue.
So, Is Now a Good Time to Refinance A Vehicle?
In terms of timing, it’s always wise to check to make sure you’re not paying more than you need to be.
Given that rates and auto values have fluctuated dramatically over the last decade, and that many dealerships mark up prices so you end up paying a higher rate than you were eligible for even at the time of purchase, there’s a good chance you can lower your monthly car payment. And if your life situation has changed, you similarly may be able to save money by refinancing to a better loan for you and your needs.
To help you decide if this might apply to you, let’s take a look at some broad guidelines and FAQs for deciding when to refinance your vehicle.
When Can I Refinance My Car Loan?
Contrary to popular belief, you are not obligated to wait any amount of time before refinancing your car loan.
You have to, instead, meet the requirements for the new loan to refinance it. Time is not part of those requirements – you can refinance immediately after buying the vehicle if you want and meet eligibility requirements. Just make sure that you are pursuing a better deal than the one you already have! (That said, in some states, you need your new registration before refinancing, which may slow down the process by 4 to 6 weeks.)
If you’re unsure about your eligibility or whether or not the new loan would be better than your existing one, using Auto Approve can help.
When Can Refinancing Benefit Me?
Refinancing is basically paying off your old loan with a new one. A beneficial refinance could mean a lower interest rate, a lower monthly payment, or both.
You may be eligible for a lower interest rate if:
Rates have gone down since you financed your vehicle
Your credit score has gone up, or
You didn’t get a good deal in the first place
Most auto loans are amortizing loans, which means you pay a fixed monthly payment with interest that is already built into that payment. Lower interest would mean a lower monthly payment, if the terms of the length of the loan stay the same. Some people instead choose to refinance to change the length of their loan, so they pay less monthly but over a longer period of time, or pay more monthly in order to have their loan paid off sooner.
Refinancing also allows you to add or drop a co-borrower from the loan and can give you up to three month’s break in payments while the loans change over.
When you use Auto Approve to refinance, an Auto Approve representative will help you understand your options and make sure you get the right deal for your unique situation – then do the paperwork for you.
Get your free, no-commitment quote today to see how much you could save.
How can I improve my credit score?
This happens when you make on-time loan payments for multiple months – or years. About 10-12 months is enough time to see a change in your credit score, which you can use as leverage to negotiate a better loan rate. Learn more about credit scores and refinancing here.
When Should I Try to Refinance My Car Loan?
NOW! Now is always the best time, if you think it might be beneficial to you. The refinance process is simple, there is no risk for you to find out your available options, and in most cases, you will be very glad you elected to move forward. With the right refinance, you can start saving money immediately.
In general, the two main reasons why people refinance their vehicles are to lower their monthly payment or lower their interest rate. So if you’re still thinking about timing, consider:
whether paying less monthly or overall could help you out
whether your circumstances have changed
whether vehicle values or interest rates have changed
The ability to borrow at a lower interest rate means you will pay less for your car after taking all of your borrowing costs into account. Since an interest rate is part of the monthly payment you agree to in the loan, it’s something that you should keep in mind as interest rates change over time.
What Do I Need for Refinancing My Car?
Generally, you are going to need to collect the following:
Information about the current loan and lender, your account number
Your current total loan balance
Vehicle information including the make, model, year, and VIN
Read more about the requirements to refinance a car.
Refinancing Mistakes to Avoid
Here are some of the most common pitfalls to avoid when refinancing an auto loan:
Prepayment penalties do exist, which means you may have to pay extra if you pay off a loan before a term is up. Look up the details of your loan and inquire what this fee is going to be.
Waiting too long to refinance. The longer you wait in the life of the loan, the less sense it makes to refinance.
Lastly, don’t miss any payments. Even if you think that the refinancing process has paused your payments, triple-check before you halt payment for the previous loan.
And that’s An Overview Of When To Refinance A Car
So, when should I try to refinance my car? Start now and discover if you’re eligible! We’re here to help.
Hopefully this guide has answered all you burning questions. As always, do your due diligence and call up your lender with questions before you make any decisions. Hidden fees, contractual obligations, and the actual value of the car should all be factored into any refinancing agreements. But, if the stars align, then there is no reason why you should not allow yourself to benefit from auto refinancing.
It’s never a bad time to check your options commitment free and discover how much you could lower your monthly payment or your interest rate.