The car industry continues to face a significant shortage in key auto parts and new vehicles due to the pandemic. The lack of inventory is causing a spike in average car prices for both new and used cars. You can cash in on rising car values and refinance your auto loan. Here are some situations where you may consider refinancing.
You want a better interest rate
If interest rates have dropped since you took out your original loan, it could be time to refinance. Even if the interest rate didn’t change, your credit score may have. If your credit score has significantly improved since you negotiated the original loan, you may qualify for a lower rate.
You want lower monthly payments
Have you seen your income dip? Are you having difficulty covering your monthly payment? Refinancing to a longer term can bring your monthly payments down significantly. Depending on your situation, consider refinancing now but increasing your monthly payment once your financial situation has improved.
You financed with a dealership
Dealers tend to charge higher rates to buyers who do not fall into the most qualified credit category. Consider checking around for better rates. Some financial institutions may offer lower rates to those with less than stellar credit scores; plus, they may offer more affordable extras like extended warranties and GAP (guaranteed asset protection) coverage.
You’re looking for extra cash
You could take advantage of your vehicle’s appreciated value in today’s supply chain-challenged market by cashing out the equity. Refinance to keep your payments the same, and pocket the extra cash. And, if you don’t have an auto loan, you may find this is a good time to take out a secured loan using your vehicle as collateral.
Before refinancing, it’s important to understand your current loan. Refinancing an auto means you’re paying off your existing loan and replacing it with a new one. You want to make sure your current loan does not have a prepayment penalty clause. The fees could cancel out any financial benefit of refinancing. The goal, after all, is to save money.
Navigator Credit Union has over a dozen branches throughout Mississippi and Alabama. Learn more at https://navigatorcu.org/ or call 1-800-344-3281.