The Benefits of Refinancing Your Auto Loan
While the term ‘refinancing’ might inspire the dread
of excessive paperwork, awkward meetings, and stress, refinancing your auto
loan is actually a much faster and easier process than you may imagine. There
is usually no need for an in-person appraisal and very little or no charges to
consider, making this less daunting than it might appear to be at first.
There are a number of reasons you may be considering refinancing your
car loan, including:
- Financial
challenges: your personal finances may have begun to worsen since you first took
out your auto loan. Perhaps you’re now given fewer hours at work, have a
new baby to prepare for, or simply have more debts accruing than you did
at the time. Monetary strain can cause severe stress and affect your
quality of life in an extremely negative way.
- Your credit
score is holding you back: your credit
score will suffer if you struggle to pay your debts, and may prevent you
from taking out loans or securing a mortgage. Your rating may have already
been low when you first took out your loan, or it might have been blank
entirely if you were a first-time driver. Boosting your credit score is
incredibly important to get a mortgage and access other forms of financing
in the future.
- You feel you
can get a better rate: your lender might not have been able to give you
the best interest rate or payment plan possible, or maybe they did, but
you feel that you can get a lower one today.
Regardless of the reasons motivating you, refinancing your auto loan
could be a powerful solution to improve your personal circumstances. Here are
the key benefits.
Set-Up Lower Payments by Extending the Payment Length
Perhaps the biggest benefit of refinancing your auto loan is securing
lower monthly payments by extending the length of the payment itself. Adding an
extra year (or two, or three) to your car loan will take the regular repayments
down to a level that you can manage with greater ease. This can reduce the
strain on your finances overall, allowing this debt to fit in with your others
in a more practical way.
Of course, you will be agreeing to a contract for a longer period of
time, which you may not feel is ideal, but the important thing is arranging
payments that can fit more realistically within your budget, whatever that may
be. If you find yourself with a shorter loan, then yes, you would be rid of the
debt sooner, but the monthly payments would be higher, possibly at a level you
simply could not manage. A lender may be able to arrange a deal that leaves you
with more disposable money each month to improve your quality of life, while
still helping you hit your payment goals. If you can use this extra money to
pay off other debts, you can begin to focus more on clearing your car loan
sooner rather than later too.
Boost Your Credit Rating
Poor credit scores are a source of frustration for countless Americans
trying to secure a loan from a bank or car dealership. Some missed payments on
open loans, too many loan applications within a short period, or being unable
to meet deadlines altogether can cause your credit score to drop over time. However,
a car dealership may be willing to provide you with an auto loan regardless of
your bad credit history, and trust you to make repayments just as they would a
customer with a better rating. Still, if you find yourself struggling to make
the payments on your current loan, you run the risk of your credit score
dropping again. Refinancing your loan to accommodate payments you are able to
manage better reduces the chances of you missing them. The longer you can keep
making payments on time, and in full, the better your credit rating can become
by the time the loan is paid off. As a result, you may be a better candidate
for other loans and finance plans in the future.
Reduce Your Interest Rate
This is one of the most compelling reasons to consider refinancing your
auto loan. It was mentioned earlier about reducing your regular payments by
extending your loan through refinancing, and a lower interest rate takes this
even further. Lower interest rates can turn a good deal into a great one,
leaving you with less stress and a reduced sense of urgency. Feeling as if you need to pay a loan off as soon
as you possibly can to avoid interest can make being in debt more difficult,
but if your lender lets you reduce your rate, it becomes much easier to manage.
If your credit rating was low before you took out your auto loan, or you
had zero credit in the first place, making regular timely payments may have resulted
in an improved score. The longer the gap between your first signing on the
dotted line and refinancing, the more chance you have to boost
your credit score. Lower interest rates may be available if overall
rates have dropped since you first took your auto loan out. With a stronger
credit rating behind you, you may qualify for a reduced interest rate, and be
able to pay it off faster, while saving on the total amount repaid.
Take Advantage of Changes in Lender’s Deal
Your lender may well have changed how they handle auto loans since you
first agreed to your current financing arrangements. For example, they may have
come under new ownership and prefer to keep interest rates lower on loans, or offer
longer contracts as a standard policy to keep monthly payments at a lower level.
At Citi Auto
Group, we’re dedicated to helping customers get an auto loan that fits your
budget and lifestyle, no matter what your credit score! Give us a call or drop
in and we’ll be happy to answer any questions you may have about refinancing
your car loan, or finding a new vehicle that meets your current needs.
Our special credit financing program enables us to offer our customers instant
credit approval on a number of financing options, and our inventory includes a large
selection of high-quality pre-owned cars
and trucks. We are located at 4160 Torresdale Avenue, and our phone number is
215-744-6901.
