Should you refinance your auto loan this year?

If you are looking for ways to lower your car payment or save money in the new year, refinancing your auto loan may be worth considering. An auto loan refinance replaces your current car loan with a new one, ideally with a lower interest rate, better terms or both.

Refinancing is not the right move for everyone. Here is how to tell if refinancing your car loan this year makes sense for you, what benefits to look for and how to find the lowest auto refinance rates.

What is auto loan refinancing?

When you refinance a car loan, you take out a new loan to pay off your existing auto loan. The new loan may come with updated terms, such as:

• A lower interest rate
• A shorter or longer loan term
• A different monthly payment amount
• A new lender, such as a credit union

The goal is to reduce the total cost of your loan or make your monthly payment more manageable.

When does it make sense to refinance your auto loan?

Refinancing may be a smart option if one or more of the following apply to you.

You want a lower monthly car payment

One of the most common reasons people refinance is to lower their car payment. You may be able to do this by qualifying for a lower interest rate or adjusting your loan term.

Keep in mind that extending your loan term can reduce your monthly payment but may increase the total interest paid over time.

Interest rates are lower than when you financed

If interest rates have dropped since you originally financed your vehicle, refinancing could help you secure a better rate. Even a small reduction in your interest rate can lead to noticeable savings over the life of your loan.

Your credit score has improved

If your credit score has gone up since you took out your original loan, you may now qualify for lower auto refinance rates. Improved credit often leads to better loan terms, especially when refinancing through a credit union.

You did not shop around the first time

Many borrowers accept dealership financing for convenience. Refinancing gives you another opportunity to compare lenders and potentially find more favorable terms.

How much can you save by refinancing?

The amount you can save depends on your loan balance, interest rate, and remaining loan term. Refinancing may help you:

• Reduce the total interest paid over time
• Pay off your vehicle sooner with a shorter term
• Improve monthly cash flow with a lower payment

Using an auto loan calculator can help you estimate how refinancing could affect your monthly payment and overall loan cost.

How to get the lowest auto refinance rates

If you want to qualify for the lowest auto refinance rates, there are a few steps you can take to prepare.

• Check your credit report and correct any errors
• Pay down existing debt to improve your debt to income ratio
• Refinance earlier while your vehicle still holds more value
• Compare lenders, including credit unions, which often offer competitive rates and fewer fees

Because credit unions are member owned, they often focus on offering lower rates and more flexible loan options.

What to consider before refinancing your car loan

Before you refinance, it is important to review the details of both your current loan and the new offer.

Ask yourself:

• Does my current loan have a prepayment penalty?
• How much time is left on my existing loan?
• Will extending the loan term increase the total cost?
• Does refinancing support my financial goals this year?

Refinancing works best when it improves both your short term budget and your long term financial health.

How to refinance a car loan

The process to refinance a car loan is usually simple and straightforward.

1. Gather your current loan details, including your balance and payoff amount
2. Apply with a lender that offers auto loan refinancing
3. Review the new interest rate, loan term and monthly payment
4. If approved, the new lender pays off your existing loan
5. Begin making payments under the new loan terms

Many lenders allow you to apply online, making refinancing quick and convenient.

Is auto loan refinancing right for you this year?

If one of your financial goals this year is to save money, reduce monthly expenses or simplify your finances, refinancing your auto loan may be worth exploring. Even if you are unsure, reviewing your options can help you decide whether better terms are available.

If you are considering refinancing your car loan, Solarity Credit Union offers competitive auto refinance options designed to help you save. Whether your goal is to lower your car payment, secure a better interest rate or simplify your finances, our team is here to help.

Learn more about Solarity’s auto loan refinance options and see if refinancing is right for you.