You can consider refinancing your car loan whenever you like. However, the main thing to keep in mind is whether there is a pre-payment penalty for your current auto loan. If there is, you will have to pay money to your original lender.
Most people consider refinancing their car loan to obtain better terms and lower monthly payments. A reduced interest rate is also a common reason to refinance a car loan. But there are many other factors at play when figuring out the right time for a car refinance, such as:
Credit scores are a crucial factor when it comes to determining your auto loan rate. If you’ve made your payments on time and have a decent credit score, you may get a better rate. Lenders take your credit score into account when deciding a rate. Even if you have recently improved your credit score, you can still qualify for better loan terms.
Situation With the Current Loan
It is generally easier to get a lender to work with you when your car’s worth is more than the remaining loan balance. Some lenders do not consider refinancing an old vehicle; therefore, if your car is brand new and still has equity, you should consider refinancing it.
You Wish to Change the Loan Term
Considering a car refinance is a good idea when you need a lower monthly payment. You can also extend the loan length to get a lower payment. However, it may increase your overall interest rate.
The Loan Rates Are Down
You may qualify for a better APR or Annual Percentage Rate if the loan rates have dropped since you got the auto loan. Even a small change in rates will help you save money on interest.
You Don’t Get Along With Your Current Lender
Some people consider going for a refinance simply because things with the current lender are not going in the right direction. Many things can sour a relationship with a lender, such as poor record-keeping or rude customer service. Regardless of the reason, refinancing may work well by alleviating some of your frustrations.
However, just because you can refinance does not necessarily mean you have to. It is important to know when this kind of decision is not worth the trouble, such as when your chances of getting a lower interest rate are low.