If you’re like most people, you get advertisements in the mail about refinancing your existing vehicle loan on a regular basis. In most cases, you’ll not even have given the idea a thought. However, if any of the five situations prove pertinent to you, it may just be time to consider refinancing your auto loan.
You’re Struggling to Make Payments
One of the reasons for people to opt for auto loan refinancing is to reduce their monthly payments. Sometimes your financial situation alters, and you need to be able to adapt. Refinancing your auto loan for a longer term can allow you to receive a lower monthly payment that is more affordable for your current budget.
You Want a Lower Interest Rate
According to Lantern by SoFi, “If your financial situation has improved significantly since you took out the original loan, you would qualify for a lower interest rate.” If this is true for you, it may be worth exploring auto loan financing options.
This could be due to the fact that you didn’t shop around initially when you got your auto loan, or it could be that you’ve improved your credit score. Either way, you can opt for refinancing your auto loan for the same term length, just with a lower interest rate. This will permit you to pay less in interest over the life of the loan than you would with your existing auto loan.
Your Co-Signer Wants Off of the Loan
If you used a co-signer to get approved for your auto loan, everything that happens with your loan is reported on their credit history as well. Let’s say that your co-signer needs to reduce their debt ratio. So, they ask you to remove them from your vehicle loan.
If your current vehicle loan lender doesn’t allow for a co-signer release, you may want to opt for refinancing that loan. In most cases, you’ll be able to get a loan on your own if your credit history or income level has improved since you got the original vehicle loan. Once the refinance goes through and your old loan is completely paid off, the debt comes off of the co-signer’s credit report.
You Need Cash Now
From time to time, you may be hit with an unexpected expense. Getting money fast to pay for that expense can be difficult to do without a perfect credit score. Fortunately, if your vehicle is worth much more than your existing auto loan, you can typically pull cash out.
This process creates a larger vehicle loan. This might increase the monthly payment amount and/or the term of the loan. Since your vehicle is being used as collateral for the loan, it can give you the added advantage of being approved over traditional routes like a personal loan.
You Want To Shorten Your Loan Term
If you’ve increased your income since you initially got your auto loan, you may want to pay it off faster. While you can likely pay more each month, it can be a struggle to consistently pay more than is asked. You can ensure that you pay more by refinancing your vehicle loan for a shorter period of time as your monthly loan payment will go up.
Auto loan refinancing is a great financial tool to consider when you’re dealing with any of the five situations that we went over above.