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If you're feeling the weight of high car payments or simply looking for ways to save money, auto loan refinancing might be the solution you're looking for. At Scenic Community Credit Union, we help members take control of their finances by offering competitive auto loan refinancing rates and personalized service every step of the way.
Let’s take a look at how auto refinancing works, what the process involves, and how it can work in your favor. Whether you want to lower your payments or pay off your loan faster, refinancing could help you reach your goal.
What Is Auto Loan Refinancing?
Auto loan refinancing is when you replace your current car loan with a new one. It can be with the same lender or a different one. The goal is to get a new loan with better terms.
When you refinance your vehicle, the new lender pays off your existing loan in full, and you take out a new loan for the remaining balance. The vehicle serves as collateral for the new loan.
Depending on your financial goals, auto loan refinancing can be a smart move. Here are a few common reasons why members choose to refinance:
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Lower Monthly Payments: If your current car payment is straining your budget, refinancing can lower your payments with a better interest rate or by extending the loan term.
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Lower Interest Rates: If your credit score has improved since buying your car, you may qualify for better auto loan refinancing rates.
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Shorter or Longer Loan Terms: Refinancing allows you to choose a new loan term that works for your budget. With a shorter term, you can pay off your loan faster and save on interest. A longer term can lower your monthly payments, although it will increase the total amount you'll pay in interest.
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Free Up Cash: Refinancing could give you more breathing room in your budget to pay down other debts, grow your emergency fund, or handle unexpected expenses.
When Should You Refinance Your Car?
Refinancing your vehicle may help you save on interest or lower your monthly payments. Before you apply for new vehicle financing, consider your current financial situation to see if it will help you save enough to make it worthwhile.
You might want to refinance your car loan if:
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Interest rates have dropped since you took out your original loan
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Your credit score has improved
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You want to lower your monthly payments or pay off your loan sooner
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You didn’t get the best rate when you first financed the vehicle
Consider a practical example to see how much you can save when you refinance your car:
Let's say you owe $15,000 on your car with an interest rate of 9.5% and 48 months remaining on the loan. Your monthly payments are $377, and you'll pay about $3,089 in interest over the next four years.
The interest rate decreases to 5.5%, and you decide to refinance with the same 48-month term. Your new monthly payment will be $349, and you'll only pay $1,745 in interest over the life of the loan. Just by refinancing, you'll save over $1,344 in interest.
Is Car Refinancing Always a Good Idea?
Although vehicle refinancing offers several important benefits, it's not the right choice for every situation. Refinancing to extend your loan term may lower your monthly payments, but it also means you’ll pay more interest over time. Depending on the lender, you may also have new loan fees, or your original loan may have a penalty for paying it off early.
Car refinancing may not be worth it if:
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Your car is too old or has high mileage
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You’re near the end of your current loan
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You owe more than the car is worth
How to Refinance Your Vehicle in 5 Simple Steps
Refinancing your vehicle is easy with the right lender. Scenic Community Credit Union’s dedicated team will guide you through each step to help you get an auto loan that works for you. In no time, you could be enjoying better terms and greater financial flexibility.
1. Review Your Current Loan
Before you apply for new vehicle financing, gather the details of your existing loan — your interest rate, monthly payment, remaining balance, and the remaining term. This information helps you determine whether refinancing makes financial sense.
2. Check Your Credit Score
Your credit score plays a significant role in determining your new interest rate. The higher your score, the more likely you are to qualify for a better rate. It’s a good idea to review your credit report to make sure the information is correct. If you spot any errors, you can dispute them and possibly have them removed or corrected.
3. Compare Offers
Compare refinancing offers from different lenders, including your trusted credit union. Scenic Community Credit Union offers competitive rates with no hidden fees. Remember to compare rates, loan terms, and associated costs to find the best deal.
4. Apply for Refinancing
Once you find a good offer, submit an application. You’ll need to provide information about your current loan, income, employment, and the vehicle you are refinancing.
5. Close the Loan
If approved, your new lender will pay off your existing loan, and you’ll start making payments to them on your new loan. Be sure to confirm that your old loan is fully paid off and closed to prevent duplicate payments.
Is Refinancing the Right Move for You?
Refinancing your auto loan can be a smart way to improve your financial outlook. With a trusted partner like Scenic Community Credit Union, you may be able to lower your interest rate, reduce your monthly payments, and gain more control over your budget.
Click below to learn more about your options.
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