Are you drowning in high payments with a high-interest rate car loan that you simply can’t afford? Were you one of those car shoppers that smelled the new interior, gawked at all the gadgets, took a test drive and just wanted to hit the road in your new car no matter what the cost or the finance rate? Like many others in your shoes, after the initial excitement wore off you realized the interest rate was higher than you expected, and now it’s squeezing your budget.
You might want to think about refinancing your vehicle. Refinancing could save you money if you qualify for a better rate. And, at a credit union you may benefit from more flexible repayment terms and certainly more personalized customer service.
How Does Refinancing Work?
The process is similar to refinancing your home – only much simpler. Just like a home refinance, you’re using a loan from another lender to pay off an existing loan, and doing so at a much more affordable interest rate. The point of refinancing is to get a better deal. A lower interest rate could result in hundreds of dollars in savings while a longer term may make paying off the debt easier on your budget.
When Does Refinancing Your Vehicle Make Sense?
- If you didn’t get the best interest rate available the first time. Perhaps you were in a big rush to buy your vehicle and you didn’t shop around first for the best rates with local lenders. Credit Unions in particular are known for offering favorable interest rates on auto loans to their members.
- An auto refinance can be useful for those people who are saddled with high interest rate loans due to a poor credit score, lack of a credit history, or unemployment. As long as you haven’t missed any payments, it’s worth seeing if you can grab a more attractive rate this time around.
- If your financial situation has changed since you initially got your loan it may make sense to refinance your car. If your credit score has improved, even by just 50 points, that improvement can earn you a lower interest rate.
- Maybe you have discovered a mistake on your credit report that cost you a better rate. If that mistake has been corrected it may be a good time to refinance your vehicle. You can check for credit report errors on AnnualCreditReport.
- If you have only one or two years left on your car loan, it might not make sense to refinance into a new loan with a longer term. But if your objective is to reduce your monthly payments, a refinance may be the way to go.
Why Refinance Through A Credit Union?
- Because credit unions are not-for-profit they work exclusively for their member’s benefit and often offer unique loan programs that might not be available from a traditional bank.
- Lower Interest Rates: At a credit union earnings are passed back to their members in the form of lower rates and fees. According to the National Credit Union Administration the average car loan from a credit union was 2.61% lower than the average bank.
- Flexible repayment terms: Many credit unions offer financing up to 100% of the vehicle’s value and provide numerous repayment options.
- Loan Protection Products: You can usually buy GAP coverage from the auto dealer. If you purchase that insurance from your credit union you can usually save hundreds of dollars for this useful protection.
- Skip-A-Pay: Credit Unions allow their members to skip a loan payment now and then if they are facing a financial crisis. You can forget about asking a car dealer for that type of special treatment.
What’s better than a lower rate and a lower monthly car payment?
Because the auto refinancing application only takes a few minutes to complete and the entire process isn’t burdensome, you have little to lose by trying to get a better deal. So, if you love your vehicle but not your loan it might make sense to refinance your loan with your local credit union.