When is the Right Time for Car Loan Refinancing?

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car loan refinancingCar loan refinancing can help save money. For many people living in the United States, having a car is more of a necessity than an option. Whether it’s for work or dropping kids off at soccer practice, there are tons of reasons why people need a vehicle. The big question is, “When is the right time for car loan refinancing?”

Most car buyers aren’t going to be able to afford such a large purchase without some form of financing. About 107 million Americans currently have debt on a vehicle. That translates to well over 40 percent of the total adult population of the U.S. No matter who you are, or how much you owe, you’ll be better off if you can pay less on your loan. This is sometimes possible through refinancing your car loan.

When is the Right Time for Car Loan Refinancing?

The following is a guest post of our fabulous staff writer and editor team. Enjoy!

Why Refinance Your Car Loan?

Some people might wonder if it’s worth their time to refinance their car loan. That depends on how much you’ll save by getting a better rate. There’s over $1 trillion in outstanding debt on car loans in the U.S. right now. Car loan refinancing won’t lower the principle you owe on your loan; but it will decrease your interest. Even slightly reducing your annual percentage rate (APR) can potentially save you hundreds, or thousands, of dollars over the course of your loan. Use a loan calculator (here’s a good one) to see exactly how much you’ll save by refinancing.

Can Anyone Refinance Their Car Loan?

There are no restrictions on who’s allowed to refinance their car loan. However, your credit history will determine a lender’s willingness to work with you. A recent bankruptcy might make it more difficult to refinance your car loan. At the same time, consistently making loan payments will show that you’re reliable. Lenders will give better interest rates to people who they consider more likely to pay them back.

Where Can You Refinance Your Car Loan?

Finding the right lender is perhaps the most important aspect regarding refinancing car loans. A lot of people intuitively go to their bank or credit union when they want to refinance. This isn’t a terrible path; but it’s not necessarily the best one either. Many people will find they’ll be best off by refinancing with a company that specializes in car loans. These organizations will be able to do the best job of evaluating each person’s individual situation, and get them the best possible loan.

When is the Right Time for Car Loan Refinancing?

If you’re able to immediately refinance your loan for a better rate, do it now. There are a few factors, however, that make refinancing at certain times more advantageous:

  • Interest rates are low: Trends of the economy as a whole can play a massive role in determining the best time for you to refinance. If borrowing money is particularly cheap, then you should seize the opportunity to get a better rate.
  • You want to lengthen or shorten your loan: The duration of your loan will affect both monthly payments, and how much you will pay over the course of the loan. A longer loan will typically have lower installments, but cost you more once you’ve paid it off. Your current financial situation will play a big role in determining this.
  • Your credit has improved: As already stated, your credit history is critical to determining how much you’ll pay when borrowing money. You should definitely try to refinance if you’ve recently improved your credit score.

Related: How to Successfully Reduce the APR on your Car Loan

Do You Have to Wait to Refinance Your Car Loan?

Many people assume you need to wait a certain period of time before refinancing a car loan. But this actually isn’t true. You can refinance your car loan at any time. It’s less likely you’ll find a significantly better rate immediately after taking out the initial loan; but it’s possible. Maybe your lender didn’t give you the best possible deal available to you. In a situation like this, you might want to refinance only a few months, or even weeks, after taking out the original loan.

There are many situations that call for car loan refinancing. They all share one thing in common: saving you money. Don’t hesitate to refinance your auto loan if you find a better rate. It can save you heaps of cash in the long run. So when is the right time for car loan refinancing? It could be right now! Check it out and start saving money!

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