When is the Best Timing for an Auto Loan Refinance - Millstream Area Credit Union
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When is the Best Timing for an Auto Loan Refinance

October 10, 2022

Whether your car is new or old, now is the time to learn about refinancing. The financing, your loan, relies on the interest rate to charge you for borrowing, and there are factors that could make this charge lower, even if your car is relatively new.

Reasons To Finance

Saving money is not always about getting a good price. Start with an acceptable cost but pay attention to the percentage of that original amount which you get charged for financing. Percentages may trip people who struggle with the concept, but it can be simple to understand as follows: Think about a pie.

Slicing The Pie

The pie is your money, and you can give away a big or little amount depending on the size of the slice. That is the percentage. Do you want to give away big or little slices of the pie?

The rate you are charged to borrow money comes from the lender, and you want a small percentage so they only take a small piece of the pie. Hopefully, you start with a reasonable slice, but now, what if you could make their slice even smaller and keep more pie?

Refinancing Saves You Money

At any time, you could investigate whether your charge for borrowing, the interest rate, may be lowered. You would get to keep more pie. Then, you finance your loan again, and this is refinancing.

However, the following factors might affect whether the answer is now or later:

  1.       Do you get charged for paying off the loan early? Believe it or not, some loan structures penalize you for paying back early.
  2.       Has your credit score improved? If your score has grown and stands higher than at the time of the original loan, it may be a good time to refinance.
  3.       Did you finance through the dealer? Maybe it was a matter of timing but working through dealers often means a higher interest rate, so take more time now to investigate if other financial institutions may charge less.

Tight Monthly Budgets

Another reason to refinance may not save you money in the long run but could make a difference today. If you took out a loan for a few years, your monthly payment may be larger than if you took the loan out for longer.

Think about that pie; if you give out smaller pieces, it will last longer. However, you keep less pie, too. It may not save you on your total loan amount, but it may affect your monthly spending, making ends meet easier.

Assess Your Situation

There are circumstances when you should wait. Do you have the title yet on a new car? Did your credit take a small hit from the loan process? Did you pay higher interest in the beginning?

If any of these apply, then give it some time or have at least two years left in the case of an older loan. When the title arrives, your credit shifts up again, and there is still benefit to refinancing, then make your move.

Refinance makes good financial sense, so take advantage of the option if any of the above circumstances apply. And, enjoy more pie!


Find out about your options for refinancing today when you learn about the available interest rate for your circumstances.

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