Perhaps it has been a year or so since you’ve purchased your car — have you even thought about refinancing your auto loan?
If you haven’t, you should. Quite simply, APR rates change daily on everything, and the rate you received when you first signed your purchase and sales agreement at the car dealership is old and antiquated.
Every day brings new rates and deals for financing companies, and this means that you could be saving yourself a decent chunk of money if you were to refinance your current auto loan.
But how do you know if now is the right time to start the refinancing process? Simple — here are four areas to explore to help you make your decision.
1. How’s your credit score?
If you know that you have been paying all of your bills on time for a few years, then you can be virtually positive that your credit score has been steadily increasing due to your positive repayment behavior.
With that being said, you can rest assure that your credit score is now stronger than it was when you initially purchased your car. Your chances for negotiating an even better APR rate on your car loan are highly in your favor.
2. Are you in a lengthy auto loan?
If you decided to take out the asking price of your car for repayment over the course of five-plus years, then you are in a rather lengthy auto loan.
What you probably don’t realize is that the longer you pay on your car loan, the more interest you end up paying in the long run. And what that really means is the bank is making some decent cash off of you since you agreed to such a long-term loan.
Your goal with any loan you take out should be to agree to repay it in the shortest amount of time possible, so you can avoid paying extensive interest charges.
3. Do you owe more on the loan than your car is worth?
It’s never any fun to realize that your once brand new car isn’t worth half of what you financed it for. If you find yourself in this predicament, then it may benefit you to refinance your auto loan. Your lower APR rate and shorter loan term could actually help you get your loan paid off quicker so you don’t feel like you’re paying off a Lamborghini rather than a Honda.
4. Are your monthly payments getting too much to handle?
The payments may have sounded good when you bought your car, but are they getting a little tough to meet now that you’ve been driving your car for some time? One major advantage to refinancing your auto loan is that it will most likely lower your monthly payments. This will free up some of your money to put into another bill or allow you to start building a savings should an emergency come up in the future.
The key points to remember when it comes to deciding whether or not refinancing your current auto loan is right for you is to factor in all of the above points and concerns. If it isn’t going to benefit you in the long run, then it may be better to stick with your original loan and its initial rates.
Danielle Buffardi is an auto industry journalist for the Law Offices of Daniel R. Rosen, a Denver auto accident law firm with over 25 years experience handling tens of thousands of accident and personal injury cases. Danielle has been a professional writer for over 10 years. For more information, please check out our auto safety blog.