What Should I Consider Before Refinancing My Auto Loan?

Buying a new or used car is one thing – ensuring that you have the right auto loan to cover it is another! The thing that some people forget is that if they’re struggling to make their monthly auto loan payments or if interest rates have just gotten far too high, there are steps you can take to remedy all of that pressure and stress. One of the biggest things we recommend to folks that are grappling with their auto loan payments is simple: refinancing.

Refinancing your auto loan has the potential to make your life a LOT easier, but there are a few things you should consider before you speak with your bank or credit union about refinancing.

Make Sure Your Credit Health is Solid

Your credit score is a big factor in determining your auto loan rate in the first place. If your credit score has gone up since you bought the car and you’ve consistently made on-time payments, you’ll have a better chance of getting a good rate that will save you money in interest over the life of the loan. The better your credit score is, the more lenders will be willing to give you the loan (with a better interest rate!) since you have a higher degree of creditworthiness.

RMLEFCU Special: SavvyMoney

At RMLEFCU, we wanted to make sure that our members could take a pulse check on their credit health whenever and wherever they needed to. That’s why we partnered with Savvy Money. SavvyMoney gives our members a well-rounded, comprehensive look at their credit situation and helps people understand what factors are positively or negatively affecting their overall credit score.

Ensure That You Aren't Underwater with Your Current Loan

Generally, it’s much easier to find a lender who’s willing to work with you when your car is worth more than your remaining loan balance. According to Lending Tree, new cars can lose about 20% of their original value within the first year, and an average of 40% in five years. Time is money!

Be Honest With Yourself in Regards to Your Financial Situation

Lenders consider a wide array of factors to settle on an auto loan rate – from your credit scores to your debt-to-income ratio (the latter is calculated by dividing your monthly income by your monthly debt payments). Thus, as we said before, make sure your credit score is in a good place and that your DTI ratio is decreased as much as possible to secure more favorable terms on your refinanced loan.

How RMLEFCU Can Help

Especially nowadays, where gas is costing an arm and a leg, it’s no wonder that even the most financially responsible people are struggling to get by. If you’re looking to refinance your new or used car, rest assured that at RMLEFCU, not only do we have auto loan rates starting at 3.59 APR* rate, but for June and July, we’re offering our 90 Day No Payment Special!

Interested in applying? Visit this page to get started. Have more questions? Stop by any of our branches or give us a quick call at 303.458.6660.