Is Auto Loan Refinancing Right for You?
When you first bought your car, you chose the loan offer that worked best for you at that time in your life. But now it’s a few years later and your circumstances have changed. Maybe your credit has improved or your other bills have increased and you’re looking for a way to save a little bit of money. If so, car refinancing might be the right choice for you!
In essence, car refinancing is taking out a new loan with a lower interest rate and/or longer lending period to pay off the remainder of your original auto loan. For example, if your original loan was for $20,000 and you’ve paid off $5,000, you would be refinancing $15,000 at a lower interest rate, for a longer time, or both.
Auto loan refinancing may be a great financial decision for you if:
- Your Credit Has Improved
The greatest factor that determines your interest rate is your credit score. If your score was sub-par or even just average when you originally applied for your auto loan and it’s improved since then, you’ll likely be offered better rates this time around. Even a small rate decrease can save you big in the end.
- Interest Rates Have Dropped
Interest rates are in constant flux. Even if your credit hasn’t changed since you first applied for a loan, market rates may have changed in your favor since then. It’s always worth looking into to see if you’re leaving your hard-earned money on the table every month.
- Your Original Loan Offer Wasn’t the Best
If you didn’t do your homework beforehand or needed to buy your car too quickly to be able to shop around for the best rate, you may have done yourself (and wallet) a disservice. Take the time to research all your options before you refinance to make sure you’re getting the best rate possible.
- You’re Having Difficulty Making Your Payments
Sometimes it’s not the loan rate but the length of your repayment period (aka the loan term) that makes a big difference. If your budget has decreased since you got your loan and you’re having trouble making your payments each month, you should consider refinancing for a longer term. Your payments will drop significantly if you’re making them over 60 months instead of 48—just remember, the longer the term, the greater the accrued interest (so you’re actually paying more for your car in the end).
- Your Loan Isn’t Too Old
More often than not, auto loan interest is “front loaded,” meaning your early payments will go more toward interest than principal, so refinancing too late in the game may not save you much.
Now that you know whether auto loan refinancing is right for you, it’s time to find the best offer. FirstCapital Bank of Texas offers relationship and auto-pay discounts, flexible terms, and an easy online application process. Ready to refinance now? Take advantage of rates as low as 3.994% APR*—but don’t wait too long, this great rate ends 6/30/19!
*Subject to credit approval. APR of 3.994% reflects a relationship discount and is based on a $5,000 loan amount with a 60 month term and 60 monthly payments of $92.07. Valid through 6/30/19.