How To Refinance an Auto Loan

How To Refinance an Auto Loan

From Roshita Verma

Buying a new car is exciting — until the interest rate is higher than you expected. You may have thought you got a great deal when the keys were handed to you, but a few weeks down the road

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Buying a new car is exciting — until the interest rate is higher than you expected. You may have thought you got a great deal when the keys were handed to you, but a few weeks down the road, you may feel that you’re in over your head. If you’re on a limited budget and your auto loan interest rate is too high, refinancing can be a smart choice.

While auto loan refinancing is a great option, many people don’t exactly understand what it is or its associated long-term effects. In this article, you’ll learn more about auto loan refinancing and how to go about refinancing your Montana auto loan rates.

What Is Auto Loan Refinancing?

Auto loan refinancing involves replacing your existing car loan with a new loan at an interest rate better suited to your financial situation. Just like regular auto loans, refinanced loans are paid off through fixed monthly payments over an extended period of time, usually spanning several years. If you’re considering refinancing your auto loan, it’s important to understand Montana auto financing to know whether you're making the right decision. 

When Is Refinancing a Good Idea?

There are several scenarios where auto loan refinancing makes sense. You should consider refinancing if any of the situations below sound familiar:

        You want a better interest rate that decreases your monthly payment

        You wish to shorten your loan term and pay off the debt sooner

        You need to stretch out your loan term to lower your monthly payment (just remember that you may end up paying more interest over time)

Now that you understand when it’s a good idea to refinance your auto loan, it’s important to know how to go about doing it. 

How to Refinance Your Auto Loan

First, take a look at your credit score. Your credit score may need improvement if you’ve missed payments, are using more than 30% of your available credit, or have a lot of recent credit inquiries. Generally, high credit scores yield the lowest auto loan interest rates. So before you begin refinancing, see if you can make any improvements to your credit score to receive a better rate.

Next, get your documents in order and do your research. It could be simpler to get a better deal from your current lender, so check with them first to see if you’re eligible for an interest rate modification. If your current lender can’t offer a better interest rate, you’ll want to shop around. Compare rates online or visit lenders to see the best options available. Before choosing a lender, decide whether the loan fits your budget and your financial goals.

Finally, decide on a lender and set up payments. After you've accepted the terms of the new loan, the new lender will pay off your previous loan and help you understand your payment options. Remember that the best way to avoid late payments and protect your credit score is to authorize automatic bank payments.

Learn More About Montana Auto Loan Refinancing

Now that you’ve read over these tips, you have a better understanding of refinancing. If you think refinancing your auto loan might be a good option for you, contact Whitefish Credit Union today.

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