What Refinancing Means and Why You Should Do It Today
According to one set of data, there are over 107 MILLION Americans who have a vehicle loan, and of those people over 6 million are late on their payments.
If you're one of the 107 million, that means that you were issued an interest rate with your loan, likely based on your credit score and a few other factors. For people with less than good credit, their interest rates on vehicles can be in the double-digit range and we have all seen the ads for "Bad credit? No problem!" at dealerships that are happy to approve loans with extremely high interest rates for people looking for used vehicles. High interest rates lead to higher payments and a greater chance of you being upside down on your loan sooner rather than later.
One of the biggest mistakes of purchasing a vehicle is thinking that you're tied to your loan (and your high interest rate) for it's entirety. If you signed a car lease and your rate is higher than 4.5% it might be time to consider refinancing your vehicle!
What is refinancing?
Refinancing your vehicle means getting a new loan at a better interest rate to pay off your initial loan. Getting a loan to pay a loan may seem counterproductive to some and maybe even a waste of time, but refinancing can save some people hundreds, or even thousands of dollars in interest depending on the terms. This simple loan calculator will show you how much you can save by refinancing at a lower interest rate.
Who should refinance an auto loan?
It's never too early to start considering a refinance option for your vehicle. In fact, the younger your auto loan, the more a refinanced loan can save you. Auto loans typically have a early-term-ballooned interest structure. You pay more interest and less principal in the beginning payments and as you get closer to paying off your loan, more of your payment goes towards the principal. Check out this example, or do the math yourself with the equation below!
How do you refinance an auto loan?Refinancing a loan can seem daunting but once you do your research and get your documents in order you can be closer to paying off your loan in just a couple of hours. Check your current loan rate, gather your insurance, VIN number, registration, mileage, and if you have a co-signer decide whether or not they will be on your new loan.
There's no reason to be stuck with a high interest rate that will cost you money. The sooner you look into refinancing for a lower rate, the quicker your new loan can help you pay off your vehicle.
At Hughes Federal Credit Union, we're happy to offer a one low-rate of 4.5% to all of our members who qualify.