Should I refinance my auto loan?
Is it worth my time?
Will it benefit me?
Refinancing an auto loan can be fast, easy, and painless but there can also be risks with refinancing an auto loan so before you refinance your loan ask yourself these questions:
What is auto refinancing?
Basically, refinancing an auto loan works by obtaining a new loan with better terms and using it to pay off an existing auto loan. Very often, people do this with the goal of getting a lower interest rate, which can save money in the long run. Or they often want to reduce their monthly car payments so that they have extra money to work with in their budget.
If you’re like many people, when you finally found the perfect car, you were so excited you neglected to shop around for the perfect auto loan. Ask yourself, “Did you know the best rates available when you financed your car? Did you check for the terms that would best fit your budget and which financial institution offered the best deal? “
If your answer to these questions is “no,” you may have ended up with a less than perfect finance package. Most car dealerships may inform you that they have the best rate for you and the vehicle model you are looking at, but how can you be sure?
If you take a little time to shop around, you may find even better financing at a local institution. If you don’t find a better rate, then you will at least know the dealer is treating you right.
How do I start the auto loan refinancing process?
Once you are ready to start the process of auto refinancing, there are a few things that you will want to have ready.
- Collect information on your current auto loan.
Be sure to know the rate, term, and payment of your current loan. If you do not have that information, you should find your most recent auto statement from the finance company.
Find the company that has the best rate and the least amount of fees for your new refinance. It is very important to see if the financial institution that you want to refinance with has any additional fees for processing your refinance. You are trying to save money, not dish it out! Make sure that you run the numbers to make sure that this is going to save you money and do not just take the word of the representative that is trying to assist you.
Will I really get the benefits of refinancing a car?
Refinancing isn’t an option for everyone. There are times when refinancing is beneficial, but you have to know what to look for.
- Do you qualify for a better rate?
Be sure to shop around for rates, but make sure you know the credit tiers associated with the rates. If your credit score is not in the tier of the advertised rate, you might not be getting the deal you were hoping for.
- Can you extend the term?
It is possible that you already have the best rate for your loan. Sometimes simply extending the term another twelve months can help lower the payment. Be sure to ask if this is an option. While the interest rate is key, a simple term extension may be the quick answer you are looking for.
Keep in mind that while you may be able to find better rates and terms, if the vehicle is worth less than the loan balance (upside down), some lenders may not extend the term of the loan. You can determine the current value of the vehicle through Kelley Blue Book, Edmunds.com or AutoTrader.com.
- Can you add extra insurance products?
Another benefit for refinance would be to add additional protection to a loan that maybe you were not offered or just unsure of such as credit disability, credit life, or GAP.
Credit disability and credit life help protect your loan if you are unable to work due to a short or long time disability or a death. Both are beneficial in protecting your credit.
GAP (Guaranteed Asset Protection) is another feature to protect your credit and your pocket. GAP is a product that can help save you money on an auto loan if you happen to owe more than what it is worth in the case of a total loss. Insurance companies are only going to pay what a car is worth after depreciation. In some cases this can leave you with a loan balance on an auto that you no longer have. GAP is a product that can kick in and take care of that negative balance so that you are not left with the burden. Also with some GAP policies they have special perks like money down towards your next auto if you finance with the same company. (Keep in mind there may be model year limit and mileage limits to qualify to add GAP to your loan.)
Whether you are just looking for information on refinancing your auto now or later, it is always in your favor if it is going to save you money. Do a little homework to check around for the lowest rate that you can achieve and you will be happy for the rest of your loan.
Knowing how a refinance will work for you is something that we can help you with at Genisys Credit Union if you happen to have questions, or you are still unsure about the new service. Give us a call so that we can help guide you to financial excellence.
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