It turns out that no matter if you're filling out your first car loan or a refinancing application
, there are plenty of similarities that the two endeavors share. There's also plenty of reason that you might consider refinancing. Let's take a look at some of the finer points.What is refinancing?
In a nutshell, refinancing your loan
is paying off your current loan with a refinanced loan from a different lender that has a lower annual percentage rate. That description there should give you some idea of the advantages right off the bat.
You'll be paying less in interest, and thus, your monthly payments will probably be reduced. Sounds intriguing, but when, and why, would you take this step? There are several possible scenarios.Why refinance a loan?
The first reason might be that you just don't feel like paying as much. Not too many can argue with this sentiment. If you have an opportunity to save money, why not take it? Thanks to the fact that interest rates fluctuate, there's a possibility that the current or future average interest rates might be lower than what they were when you first got your vehicle.
If this is the case, then you can pounce on the advantageous economic situation by applying for a refinance. It's not a particularly involved process, checking interest rates, so be sure to hop online periodically to take a look at where the market stands.
Your refinance efforts will be aided if your credit score has gone up since you bought your vehicle. As you may well have been told when you first made your purchase, the better your credit score, the more likely you are to receive favorable rates.
In the case of car loans, if you've been paying on time for the past twelve months and haven't had any slip-ups elsewhere, it's likely that your score has improved. Make sure to check it when you can to get an idea of where your score is at and if it's the right time to apply for a refinance.
This is especially useful if you had to purchase your car through the dealer's financing and they marked up your interest rate because you didn't have many other options. You can refinance and find more favorable terms once your score goes up.
There are other reasons you may want to refinance, of course. It could be that you're having some difficulty making your current payments. Unexpected financial hardships are a reality, and if you find yourself in the midst of one, refinancing might be a way to either lower your rate or extend your rate's terms so you have more time to pay and a lower monthly expense.If you want to refinance
Remember that just like with buying a new car, it pays to consider all of your options. Check your current credit score
, shop around for the best interest rates, and see which lenders might offer you the best deals.
If you're considering refinancing but can actually afford to pay more from month-to-month, it might be a good time to take a lower-interest loan with a shorter term. This way, you can pay off your loan faster and reduce the total interest that you'll be paying, saving yourself money in the long run.
Think about your individual situation, take the steps you need, and if refinancing is right for you, take every advantage you can to put yourself in the best spot possible.