Vehicle owners usually refinance when they think they can get a more attractive interest rate or better overall terms on the new car loan. The options available to vehicle owners can vary on several factors, and the right option for each loan is subject to changes in the length of the loan, monthly payments, and even changes to your credit score.
What is Auto Refinancing?
Auto refinancing helps you get a new car loan to pay off your old loan. The new loan replaces your old obligation, and you make monthly payments based on the new loan’s terms.
In many cases, auto refinancing can lead to substantial savings for the vehicle owner. This is most often true if the interest rate on the new loan is significantly lower than the rate on your original loan. So, it’s worth looking into a refinance if average auto loan rates have dropped markedly since you applied for your original loan.
Another circumstance where an auto loan refinance might make sense is if your credit score has improved since you took out your original loan. When that is the case, you might qualify for a better rate on your new loan. Shortening the term on a refinance also can save you money if your original loan had a longer term.