What are you currently paying in interest on your auto loan? If it’s too high and you think you could qualify for a better rate, refinancing could be a viable option — and if you’re looking for the right place to refinance your existing auto loan, credit unions are a particularly ideal option thanks to their better comparative rates and lower overall fees.
The lower your interest rate, the less your monthly payment is and the more you can save long-term. Read on to learn more about auto loan refinancing, the benefits of working with a credit union and more:
What Is Auto Loan Refinancing?
Auto loan refinancing is a process that involves replacing your current auto loan with a new loan. Consumers tend to refinance when it makes financial sense. For instance, you might elect to refinance if you can do so with a lower interest rate compared to what you’re currently paying, which can save you money on monthly payments and save over the loan’s term. Or, you may elect to refinance so that you have a longer repayment period if your current payment is straining your budget.
There are a few important variables that are considered by lenders when refinancing. One is your credit score. Generally, a high credit score qualifies for low interest rates, as lenders perceive you as a more trustworthy consumer compared to if you had a poor credit score. Loan history is also an important factor lenders weigh.
Benefits of Refinancing an Auto Loan with a Credit Union
So why should you consider refinancing an auto loan with a credit union? Here’s a look at some of the top reasons:
- Lower comparative interest rates: Credit unions are not-for-profit financial entities and are thereby better able to offer lower and more competitive rates compared to conventional banks.
- Flexible loan terms: Credit unions also tend to offer more flexible loan terms and repayment options to meet any unique needs or requirements of their borrowers.
- A more member-focused approach: Credit unions have members, not customers. Because of this, credit unions tend to take a more member-focused approach and prioritize member well-being over anything else.
How to Know If Refinancing Is Right for You
There are many situations where it may make sense to consider refinancing an auto loan. Here’s a look at some of the various factors to weigh:
- Market factors: If the market has improved and auto loans are now being approved at lower rates compared to what you’re currently paying, it might make sense to want to take advantage of such conditions.
- Your credit score has improved: Say your credit score was average when you initially financed your vehicle and it’s improved to the point where it’s now in the “excellent” range. You can likely shave several percentage points off your current interest rate if you refinanced based on credit score improvements alone.
- Your car payment is too high: Conversely, if you’re struggling to pay off your existing loan every month, you might consider refinancing to achieve a lower monthly payment amount over a longer loan term.
There are some potential downsides that you want to be aware of when refinancing. For instance, you may be on the hook for closing costs that could eat into any projected savings. Additionally, extending your repayment period can end up costing you more in interest in the long-term.
How to Refinance an Auto Loan with a Credit Union
Pursuing an auto refinance loan with a credit union tends to be easy and streamlined. However, before you begin the process, you should check your credit history and score to ensure you’re in a financial situation to secure a good rate and also review your current loan to make sure the effort of refinancing will be worth it to you.
If you move forward, be sure to shop around and see what various credit unions in your area are offering. Once you make a decision to work with a credit union, you’ll need to gather necessary documentation (proof of income, vehicle information, vehicle title, etc.), apply for your new auto loan (this can usually be done online or in person) and then close the loan if you’re approved for it.
**Tip! – When comparing rates, make sure you look for the “used auto loan” or “refinance rate”. Some borrowers only advertise their “new auto loan rate”. Island Federal offers the same advertised new auto loan rate on most refinances!
Take Control of Your Auto Loan Payments
If you’re serious about saving money on your auto loan, refinancing could be the way to go. If you’re a Long Island resident, consider Island Federal Credit Union for your auto loan refinancing needs. We offer competitive rates, various member benefits and personalized service to help ensure that your needs are met.
Island Federal Credit Union Auto Loan Refinancing
For more information on auto loan refinancing and to learn about the benefits of doing so with Island Federal, contact us today to schedule a consultation. Our competitive rates and member-first service have made us the go-to credit union for Long Island residents for loan refinancing and all other banking and financial needs. Contact us today for more information and to start the application process.
FAQs
What are the advantages of refinancing my car loan with a credit union?
Some of the top reasons to refinance a car loan with a credit union include lower interest rates, flexible loan terms and a more member-centric focus compared to conventional lending entities.
How soon can I refinance my auto loan after purchasing a vehicle?
Typically, it’s suggested that you wait to refinance a vehicle loan until after the title has been transferred to the initial lender. This usually occurs within the first few months of vehicle ownership.
Does refinancing affect my credit score?
Yes. When you refinance, the lender will run a “hard pull” on your credit, which may cause your score to dip a bit. Usually, this decrease is only a few points and is quickly made up. Additionally, you may end up with more accrued debt, which can impact your debt-to-credit ratio, which may also impact your credit score.
What documents do I need to refinance my car loan?
Documents you’ll likely need to refinance your car loan include proof of income/employment, proof of insurance, proof of residence, vehicle title, and potentially pay stubs or W-2s.
Are there any fees involved in refinancing?
Potentially. In addition to closing costs that may be due at the time you close on the loan, you may also be on the hook for application fees, title transfer fees and registration fees. Talk to you credit union representative at the start of the refinance process so you are aware of any potential fees you need to account for.
Can I refinance if I still owe a significant balance on my current loan?
Absolutely. It often makes more sense to refinance when you have a large balance left on the loan compared to if it’s nearly paid off. Doing so means you’ll be able to save more money on the remaining balance if you secure a lower interest rate.