If you’ve owned your car for a while and it was purchased through a loan, you should consider refinancing your car. Refinancing is essentially taking out another loan to pay off the original one. It can offer you many benefits like lowering your monthly rates, shortening the time left on your loan or the opportunity to pay less interest overall.
Refinancing your car is a big decision and there are several factors to consider in order to determine if it’s right for you. You may just want to get out of your original loan and depending on the reasons, could be a good move. Interest rates could have dropped or your credit score could have improved significantly, which could give you better terms and save you money.
Let’s take a look to determine if refinancing your car is in your favor:
- Interest rates have fallen – At the time of your purchase, you may have not received an ideal interest rate. If you have notice they are now lower, refinancing your car could secure you a better rate and reduce the amount of interest you pay on the remaining time of your loan.
- Your credit score has improved – As with any loan, a major factor of your interest rate will be based on your credit score. If you initially had credit problems or no history and now your score has improved, you may qualify for a lower rate through a refinance. That is why it is important to always check and stay current on your credit score.
- Your financial situation has improved – If your paycheck has increased or you’ve combined your income with a spouse, it could help improve your odds of landing a more favorable interest rate.
- Lower your monthly payments – You may prefer to have a lower monthly payment and are not as concerned about the duration of your loan. In that case, refinancing your car to reduce your payments could be an option. Although your term could be increased, your monthly rates can become more manageable for your budget.
- Money for other uses – If you are encountering financial issues and need to decrease your monthly payments or simply want to be able to save for unexpected events, refinancing your car may the solution. By extending the duration of the loan, you can help to lower your monthly payments.
Refinancing your car loan can be a great option in some circumstances and give you the ability to have more control of your finances, but you need to assess your situation carefully. You first need to completely understand your original terms and then make sure you research, plan and shop around with various lenders before refinancing your car.
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