Unless you live in a city with mass transit systems, owning a car is a convenient and safe way to travel to work, run errands, and visit friends or family. Unfortunately, the continuing effects of the COVID-10 pandemic is causing financial instability for many and car payments are adding additional stress to the household budget. Refinancing your auto loan may help with your financial goals by decreasing monthly payments and modifying loan terms. 

The national average for interest rates in 5.27% on 60-month auto loans. These rates will vary based on a review of your credit score, current term of loan, your car’s age, and other risk factors to the lender offering the loans. At Together Credit Union, auto loan rates are lower than the national average and borrowers have more flexible payment schedules. 

When should you refinance? 

If your current lender isn’t meeting your needs, refinancing with another lender may help alleviate some of your frustrations. One of the many reasons people come to the credit union is because of poor customer service from their current lender.

Your credit score has improved, or the loan-to-value ratio is in your favor. You may be able to get a better auto loan rate, saving you money in the short and long term.

You need a lower monthly payment or want to change the loan term. However, always keep in mind how interest rates will impact your finances now and in the future.  

Why should you avoid refinancing? 

If you’re close to paying off your vehicle.  Most car loan providers don’t love the idea of refinancing a car loan if you’re close to paying it off. The best thing you can do is check the value of your car versus how much you owe on it through a trusted source before considering refinancing.

Your car is older or has high mileage.  The older a car gets, or the more mileage it accumulates, the more it depreciates and the more challenging it may be for a car loan provider to consider taking on the car for refinancing. 

Your current car loan provider has a prepayment penalty.  Some car loan providers may have prepayment penalties included in the loan agreement. 

Providers include this penalty due to the money they would have lost on long-term interest. 

How to refinance?

1. First, gather your important documents.

• Personal Information: Your license, social security number, proof of residence, and proof of income.
• Vehicle Information: year, make, model, mileage, and vehicle identification number. This will help determine the value of your car.
• Current Auto Loan: Lender, account number, loan amount, monthly payment, interest rate, loan term, and the remaining loan balance and loan duration.
• Insurance: Auto insurance provider, policy number, and coverage dates.  

2. Next, compare.

Take the time to meet with several lenders and compare interest rates, loan terms, penalties, and fees, which are all part of the total costs of borrowing.

3. Lastly, apply. 

Once you have selected a lender, apply. The process will be similar to the original loan process when you purchased the car. Your new lender will pay off your previous loan, and you will start fresh with your new payments.

HINT: Talk with your lender to see if autopay is available to you, which will help ensure you don’t forget a payment

Together Credit Union has your back. 

Are you interested in learning more about refinancing? Talk to a credit union representation who can help walk you through the process and answer any questions.

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