You’ve probably heard of refinancing your mortgage, but did you know that you can refinance your auto loan as well?
This option might be good for people trying to cut costs during the coronavirus pandemic.
Here’s what you need to know about refinancing your auto loan
A recent TransUnion to study out of 1.5 million refi transactions, the average consumer reduced their interest rate by 2.4% after refinancing. This represented an average saving of $ 52 per month.
“The interest rates that credit unions charge on auto loans in general for people with good credit are phenomenal,” Clark Howard silver expert said. “A lot of credit unions currently provide auto loans at about two to three percent.”
If you’re facing a cash shortage and struggling to make your monthly payment, refinancing your auto loan for a lower payment could be the difference between keeping your vehicle and repossessing it.
But before you consider car refinancing, make sure you meet a few basic criteria:
- Make sure you are up to date on your car payments
- Make sure you don’t owe more on the car than it’s worth
You can determine the value of your vehicle on a site like Kelley Blue Book, where you can search by year, make and model.
Meanwhile, if you owe more on a vehicle than it’s worth, it might not stop you from refinancing entirely, but you might need to bring cash to the closing table.
Of course, it could be a failure if you are already struggling financially.
Where should you look for a Refi?
Clark is a huge fan of credit unions for doing auto loan refinances – or any type of auto financing, really. He notes that about 80% of people get their loans from the car dealership, but they would often do better by getting financing from a credit union.
Don’t worry if you didn’t get your initial financing through a credit union. You get a trade-in when it comes time to refinance.
“You can save a huge amount of money per month if you pay off that auto loan issued by a car dealership and take out a new one from your credit union,” Clark said.
If you are not already a member, you can locate the nearest credit union at ASmarterChoice.org.
There is usually no fee to apply for an auto loan refinance, but you may need to pay title and state fees to complete one.
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