Are you having trouble paying down your car loan? This is often a sign that it’s the right time to refinance. Let’s look at some key factors to consider regarding your financing.
Monthly Payments
One common reason people want to refinance their car loans is to lower their monthly payments. This can be a big help, especially if you’re worried about your monthly overhead.
Keep in mind that a lower payment often means paying more money down the road. While choosing this option may sound counterintuitive, bringing down your monthly costs happens naturally when you extend the term of your loan, as it will lead to more interest charges.
Therefore, it’s important to assess your situation and determine if this solution is right for you.
Improved Credit Score
Many perks come with having a good credit score. One of them is getting a better interest rate on your car loan. If your credit has gone up, this is a key factor to consider when refinancing.
For example, let’s say you have a $25,000 car loan with a term of five years, and you put 20 percent down at the beginning of the loan. With your improved credit score, you now have an interest rate of 4 percent. This would mean a monthly payment of about $368 and paying $2,100 in interest fees.
In comparison, the same loan with a rate of 6 percent brings the monthly payment up to $386. While that’s only an $18 difference, the total interest costs go up to $3,199. This means you’re paying $1,099 more over the course of five years.
Dealership Financing
A common way most people get an auto loan is through the dealership of their vehicle. While this is a convenient option, it often results in paying a higher interest rate. This is because dealers often take a commission. People also often feel intimidated to negotiate these terms.
Therefore, it’s important to shop around when looking for an auto loan. By looking outside of the dealership, you likely will find more affordable rates.
Democracy Federal Credit Union offers low-rate auto financing conducive to everyone’s budget. We invite you to apply today for affordable options.