5 Reasons to Refinance Your Auto Loan This Summer
If you're still driving the same vehicle but stuck with the same third-party loan you took out at the dealership, it might be time to rethink your financing. Refinancing your auto loan can reduce your monthly payment, lower your interest rate, or give you better loan terms depending on where you're at financially.
Refinancing is a useful financial tool because it can serve different purposes depending on the borrower’s financial situation. But just because you can replace your old auto loan with a new one doesn’t always mean you should. It’s always best to consider your current financial situation and available rates before making a decision.
Reasons to Consider Auto Loan Refinancing
1. You’ve Improved Your Credit Score
Your credit score plays a big role in determining your interest rate. If you’ve paid down debts, built a history of on-time payments, or resolved past credit issues since you bought you car, you may now qualify for a much lower rate than when you first financed your vehicle. Even a small reduction in the annual percentage rate (APR) of your car loan can lead to hundreds of dollars in savings over the life of the loan.
2. You Want to Lower Your Monthly Payment
Maybe your budget has changed, and you’re looking for more breathing room each month. Refinancing into a longer loan term can reduce your monthly payment and free up cash for other needs. Just keep in mind that this may increase the total interest you pay over the life of your loan.
If you’re choosing between refinancing with a longer auto loan term or making up your monthly budget shortfall by relying more on your credit cards, refinancing may be the smarter choice. Auto loan rates are typically much lower than credit card rates.
3. Your Current Loan Has a High Interest Rate
Many car buyers accept third-party financing without shopping around. If you originally got a higher-than-average rate, either due to credit challenges or convenience, refinancing through a credit union may offer a much better deal. This is especially true if market rates have dropped since you bought your car and you now qualify for a lower rate.
4. You Need to Remove or Add a Co-Borrower
When a co-signer is needed, it’s typically at the start of a car loan. A variety of scenarios can play out over the next months or years, such as your credit improving to the point where you no longer need a co-signer.
Whether you're removing a co-signer after building your own credit or adding a spouse for joint ownership, refinancing is often the cleanest way to update your loan. It replaces the original loan with a new one that reflects your current financial needs.
5. Your Current Lender Makes It Hard to Manage the Loan
Some lenders make payments difficult, have limited customer service, or charge unnecessary service fees. If you're frustrated with your current provider or want more flexible tools, refinancing through a local credit union like Ouachita Valley FCU can offer more convenience, better rates, and member-focused service.
Timing Matters, But There’s No One “Right” Season
There’s no consistent seasonal trend in auto loan refinancing, so there’s no one best time of the year to refinance. However, your personal financial situation may have a seasonal component.
If you’ve taken on a summer job and have extra income, now might be a good time to reduce your loan principal or refinance for better terms. Some borrowers might take on part-time work over the holidays, and their extra cash in the winter may make that season ideal for refinancing.
Other borrowers use tax refunds in the spring to make a lump-sum payment toward principal, improving their available rates and shortening their loan term.
In other words, the best time to refinance depends on your unique situation. It’s worth being on the lookout for opportunities to refinance throughout the year if you’re not satisfied with your current lender, or you suspect you may qualify for better terms.
Learn About Your Auto Loan Refinancing Options in Ouachita Parish
People who live and work in Monroe or anywhere in Ouachita Parish can speak with an auto lending professional at Ouachita Valley Federal Credit Union by calling 318.387.4592. Our team would be happy to walk you through your options so you can decide whether now is the right time to refinance your car loan.
