07.25.2011 / Should You Refinance Your Auto Loan?
While many people are familiar with the benefits of refinancing a home loan, not many are aware that refinancing an auto loan may be a simpler way to save money. Similar to a home loan refinance, an auto loan refinance can lower your interest rate and lower your monthly payment. There are many good reasons to refinance your loan, but how do you know if you are a good candidate?
"Similar to a home loan refinance, an auto loan refinance can lower your interest rate and lower your monthly payment"
Am I a good candidate?
The following guidelines are a good starting point for determining if it is worth your time to look into refinancing your auto loan.
Did you secure financing through your car dealer or your car manufacturer’s finance company? Most car dealers have a list of only a few preferred finance companies they work with to provide you financing. These companies may not always offer the lowest interest rates so refinancing with First National Bank could help lower the amount of your monthly payment.
Has your credit score improved since you applied for your current auto loan? You do not necessarily need good credit to qualify for refinancing, but an improved score could help you save even more. FICO www.myfico.com/myfico/creditcentral/loanrates.aspx
recommends that your credit score be at least a 720 to receive the best interest rate for an auto loan. If you have established credit since applying for your current loan or have improved your credit history, it may be beneficial to apply for an auto loan refinance.
Do you currently have a long-term loan? Refinancing a loan that was originally 5 to 8 years at a lower interest rate will dramatically cut back the amount of interest you pay, saving you money in the long run even if it doesn’t alter or lower the amount of your monthly payment.
Is your current interest rate higher than today’s average interest rate? If today’s interest rates are lower than your current interest rate, it could significantly lower your monthly payment. Today’s interest rates are among the lowest they have been in the last few years.
Can you pay off your current loan without a penalty? Prepayment penalties are the charges a lender imposes if you wish to pay off your loan early. Verify that your current loan terms allow for prepayment to avoid any penalties.
If you answered yes to the previous questions, you may be a good candidate for finding an auto loan with a lower rate.
What do I need to do to refinance my loan?
Review your current loan terms: Contact your current lender to get your current interest rate, remaining balance and payoff amount. You will need this information to verify your eligibility and apply for an auto loan refinance.
Contact First National Bank for current interest rates: Visit with a Personal Banker at your local First National Bank branch today to check out current interest rates and complete an auto refinancing application.
Pay off your current loan: If you are approved, a check will be sent to your current lender to pay off the existing auto loan along with a request for the title to the vehicle.