Is it the right time to refinance your auto loan?

You probably know that you can refinance a mortgage. What you might not realize is that you can refinance your auto loan too. Under the right circumstances refinancing an auto loan can be a smart move. It can lower your monthly payment, put more money in your pocket and take some weight off your shoulders. It can be a great short-term fix for extra cash each month, and will save you long-term on the interest you pay on. Whether or not it’s right for you depends on your individual circumstances, but here are some things to know:

How does auto refinancing work?

Let’s say you owe $20,000 on your current auto loan. Your interest rate is 6% and your monthly payment is $387. You have five years left on the loan. If you stick with it, you’ll pay $3,196 in interest by the time it’s paid off.

Then, assume you refinance that balance over the same five-year term, but at a 3.5% interest rate. With that single change, your payment will be $364 – savings of $23 a month – and you’ll save more than $1,000 in interest over the life of the loan.

That’s one option. But what if you are less concerned about saving in the long-term on interest and more concerned with lowering your monthly payment? If you’re able to extend the terms from five years to six years, your monthly payment goes down to $308 and suddenly you’re saving $79 a month.  

A monthly savings on your auto loan payment might enable you to afford higher gas prices, or budget for the big bump in food costs that have happened as a result of the pandemic. Or, maybe you need to pay for piano lessons or a smartphone upgrade. Whether it’s for things you want or things you need, you may find that saving on your auto loan payment can help you stretch your budget elsewhere.

If you’d like to crunch some numbers on your own to see if a refi makes sense for you, here’s an auto refinance calculator you can use.

Timing is almost everything

Now really is a good time to refinance your auto loan.

Interest rates are still very low. And while that’s true now, higher interest rates are in everyone’s future, so right now is a good time to lock in a good rate.

But there are other things to consider. If you financed your car through a dealership a few years ago, you may find that refinancing your auto loan through a bank or credit union gets you a lower rate in today’s economy. Or, perhaps your credit score was lower when you originally financed, resulting in a higher interest rate, and your score has gone up since then.

Talk to an expert

Great Lakes Credit Union has been refinancing auto loans for decades. We’ve saved members thousands of dollars in monthly payments and interest, and we can refinance both new and used vehicles.

If you have questions or want more information about refinancing your auto loan, check out GLCU’s auto loan options or give us a call at 800.982.7850.


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