It’s an exciting time when you buy a car. But if you took out an auto loan to pay for it, avoid the temptation to just sit back and assume that you still have the best deal. Is your current interest rate still the lowest available? Do you need a lower monthly payment or want to pay the loan off sooner? Things change over time, and if any of these six situations apply to you, it may be time to refinance your car loan.
6 Reasons to Refinance Your Car Loan
1. Interest rates have dropped
This one is easy to evaluate. Compare the annual percentage rate (APR) of your current loan to today’s rates. Even a small decrease in interest can result in big savings. And the sooner you refinance your car loan, the more you may save over time. Use our loan payment calculator to figure out exactly how much you could save by changing to a lower APR or different term.
2. Your credit score has improved
If you’ve improved your credit score since you applied for your original car loan, congratulations! This is a great reason to refinance since the interest rate you pay is determined by your credit score and other factors. As your credit score goes up, you could qualify for a lower APR, which saves you money.
3. You want to pay off your loan faster
Faster loan payoff is a great way to improve your overall wealth because it allows you to put the money you were paying for interest towards something else, like emergency savings or saving for the down payment on a home. When you refinance your car loan with a shorter loan term, you may pay more per month, but the loan could be paid off more quickly and you may pay less in interest over time.
Reasons not to refinance
Just as there are good reasons to refinance, here are a few reasons to stick with your current auto loan.
- You’ve already paid off much of your loan
- Your car is old or has high mileage
- Refinancing fees are more than your potential savings*
- You plan to apply for more credit soon
- You owe more on the current loan than the car is worth
*Alaska USA does not charge any refinancing fees, however, there may be a DMV fee if you are refinancing to Alaska USA from a different lender.
4. You want to reduce your monthly payment
If your circumstances have changed and you’re struggling to make your monthly payment, a car loan refinance can help. There are two ways to do this: one is to refinance to a loan with a lower APR, and the other is to refinance to a loan with a longer loan term. Be careful, though, to make sure your refinance does not find you owing more on the loan than the value of the car.
5. You didn’t get the best offer
This could have happened if you didn’t shop around for the best loan rates, or if you took a dealer rebate instead of a low-interest financing deal. If you can save money by refinancing your current car loan, don’t delay.
6. You want to remove a cosigner from your original loan
Once you’ve established credit or improved your credit score, it could be a good idea to refinance to a car loan solely in your name.
While it may not be the best move for everyone, a car loan refinance can bring many benefits. If you do decide to refinance, consider Alaska USA. We offer competitive rates, easy online applications, no fees, and a fast decision. Learn more here or apply today.
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