Getting the Most for Your Money: Refinancing Your Auto Loan

Life has a habit of changing, and sometimes your finances need to go along for the ride—especially when it comes to your ride! Refinancing isn’t just for mortgages. With the right plan, you can revise your auto payments to better meet your needs today while supporting your overall financial goals. 

Why Refinance?

There are many reasons to consider refinancing your car loan. Here are some of the most common:

• Your financial situation (including your credit score and/or debt-to-income ratio) has improved since securing your original loan, so you want to try for a better interest rate.
• Interest rates in general have dropped and you can save by refinancing at a lower rate.
• The term on your first loan is too long (especially given the age of the car). 
• You need to free up more cash immediately because of an unexpected expense or drop in income. 

Consider the Pros and Cons

Car loans can be tricky things. A car loan can be paid much faster than a home mortgage, but you also need to factor in value. As you pay your home mortgage over 15 or 30 years, your home is usually building value, whereas, with a car, the reality of depreciation is always lurking in the rearview. According to CARFAX, your car may go down in value by 20 percent during your first year of ownership. Over the life of a loan, you may end up paying several thousand dollars more than what you paid for the car originally, with that value continually dropping.

However, a lower rate can still save you a significant amount of money over the long term, especially if you refinance from car dealer rates down to credit union rates.

Sometimes emergencies come up, requiring you to access additional monthly cash. Refinancing and extending your car loan will lower your payments and may help you get through a challenging financial situation. However, you should consider doing this only in an emergency, as an extended loan will result in paying more interest overall. 

The Benefits of Working With a Credit Union 

A local credit union like Millstream is primarily concerned with supporting your financial health, not squeezing out fee after fee. We will help you consider all your options as you balance immediate needs with overall financial goals. If you’re thinking about refinancing your car loan, we can help you explore the possibilities. 

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