When and How to Refinance Your Auto Loan

While financing a car loan through a dealership may offer convenience in the moment, the pocketbook pain that can result from this choice is often inconvenient for the duration of the loan—unless you refinance, that is!

If you wish you could have a “do-over” when it comes to the terms of your loan, a “refi” may be the fix your financial future needs. Refinancing may allow you to lock in a lower interest rate, a lower monthly payment, and/or more agreeable terms for the length of the loan. 

Before you begin the application process, however, you should take stock of your situation to determine if refinancing is right for you. If your financial situation or your credit score—or both—have recently improved, for example, you may be positioned to secure better loan terms through refinancing. 

Taking stock of your situation also means reviewing the details of your current car loan. Does your loan contract include a prepayment penalty clause? If it does, refinancing may result in a fee you may not wish to pay, as the process involves your new lender paying off your old loan early. At the same time, if refinancing will enable you to pay less for your car over the life of the loan, even when accounting for incurred fees, you may want to proceed anyway. 

How much more time remains on your current loan? If you are trying to pay less interest in the long run, but you have already lived with the loan for a long time, you’ve probably already paid the bulk of the interest associated with it, which means refinancing will not help. If the car itself has been around a long time, on the other hand, or you have racked up many miles over the years, the car may have depreciated in value too much for a lender to approve a refi.

If you think you are positioned to benefit from refinancing, start gathering all of the information you will need to proceed, including proof of income, proof of auto insurance, information about your current loan, and information about your car (year, make, model, mileage, and VIN number). 

Now it’s time to start shopping around for a refi that is convenient when it comes to your bottom line! Be sure to ask potential lenders for a preapproval evaluation, which is a way for banks and credit unions to assess your eligibility for a loan without adversely impacting your credit. While you are at it, ask them if they offer a discount for setting up autopay for monthly payments, too—a great way to save money and ensure that you never forget a payment! 

As you weigh options from lenders, use an auto refinance calculator like this one to assess which offers will save you the most money in the end. Once you identify the loan that is best suited for you, make it official by filling out an application.

At Millstream Area Credit Union, we know how important it is to find the right lender when it comes to auto refinancing. We know that true convenience lasts longer than any time spent in the dealer’s financing office. Members like you need the convenience of a car loan you can afford to pay month after month. If you are interested in refinancing your car loan, reach out to us today. We are ready to help you find a loan that is truly convenient for you.

If you are interested in refinancing your auto loan, contact Millstream Area Credit Union today. We want to help you secure a loan that fits your financial situation.