Financial Tips to Do Better

At a glance:

Refinancing your auto loan can help lower your monthly car payment by securing a lower interest rate, extending your loan term, or both. If interest rates have dropped or your credit score has improved since you bought your vehicle, refinancing could save you money each month and potentially thousands in interest over the life of the loan.

Back when you first purchased your car, you likely took the time to find the one that best suited your lifestyle. For example, maybe you chose a roomy SUV for family road trips, or maybe you went with a fuel-efficient car for commuting to the office.

Unfortunately, once the first excitement of having bought a car has faded, you can find that your monthly payment is higher than you'd like. By refinancing your auto loan you can decrease monthly payments and put more money in your pocket!

What is auto loan refinancing?

Refinancing may seem like a complicated financial term, but the basic idea is simple. It involves replacing your existing car loan with a new one that has better terms.

No matter whether you stay with your present lender or move your loan to a different financial institution, refinancing enables you to adjust your repayment arrangement so that it better fits your monthly budget.

3 proven strategies to lower your monthly auto payments:

When you refinance your car loan, lower payments are generally achieved through one of three strategies:

1. Obtaining a Lower Interest Rate

Here's how it works: You could be eligible for a lower Annual Percentage Rate (APR) if market interest rates have fallen or if your credit score has gone up since you originally purchased your car.

The outcome is that although your monthly payment will decrease only slightly, the main benefit is the amount of interest you will save over the entire term of the loan. For example, if you lower your rate from 7% to 4% APR on a balance of $40,000 you could save more than $1,200 a year on interest!

2. Extending the Length of the Loan

Here's how it works: You spread the balance of your loan over a longer period (for example, extending a 48-month term to 60 months).

The outcome is that your monthly payment will drop immediately, which will help improve your cash flow should you be going through a temporary financial difficulty. (Remember that if you extend the term without reducing your interest rate, the total amount of interest will increase over time).

3. The Combination Refinance (The Ultimate Win-Win)

Here's how it works: you will be offered a reduced interest rate and be able to alter the length of your loan.

The outcome is that it combines the advantages of both situations, reducing the monthly payments considerably and lowering the total amount of interest paid over the term of the loan.

What's the advantage of refinancing or financing with a Credit Union like Atlantic?

While dealerships and commercial banks offer auto loans, local credit unions often provide distinct benefits:

1. Because credit unions are not-for-profit financial cooperatives, they do not pay dividends to corporate shareholders but instead pass their profits on to members by offering them lower loan rates.
2. By acting as a cash buyer, you can use programs such as Blank Check Approval to obtain pre-approved financing before going to a dealership, which gives you the full ability to negotiate on your own terms.
3. You're more than just an account number; local lending teams take a comprehensive view of your financial situation and provide personalized advice to make sure that your new loan suits your budget.
4. With modern conveniences, you can enjoy digital banking, use online application portals, manage your account on mobile devices, and set up automatic payments to keep track of your loan without any hassle.

Things to consider before refinancing:

Before making the switch, keep these practical points in mind:

1. Look for lock-in periods imposed by the dealer: certain dealership financing plans ask that you keep the original loan for a minimum number of months before you refinance.
2. If you extend the term of the vehicle beyond a certain point, you might end up owing more than the vehicle is worth (that is, you could be 'upside down'). It is harder to gain approval from a lender if they see you are ‘upside down’ on an auto loan.
3. Check your original contract to make sure there are no early payoff penalties or hidden fees.

4 easy steps to refinance today:

1. Check your figures: collect the amount you currently owe on the loan, the interest rate, and the details of your monthly payment.
2. Talk to a lender: Get in touch with a representative from a credit union to work out the figures. They will be able to calculate your exact monthly and total savings without it affecting your credit score before you make your formal application.
3. To submit your application: you can apply online, through video banking, or by going in person to a local branch.
4. You'll benefit from lower monthly payments: after approval, your new lender will pay off your current auto loan and arrange your new one on more favorable terms.

Are you ready to reduce your monthly expenses?

Refinancing might save you thousands of dollars if your present auto loan interest rate is 7% or more, or if your credit score has gone up. Get in touch with Atlantic, to hear more about their competitive auto loan rates and begin cutting your monthly car payments today!

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Each individual’s financial situation is unique, and readers are encouraged to contact the Credit Union when seeking financial advice on the products and services discussed. This article is for educational purposes only; the authors assume no legal responsibility for the completeness or accuracy of the contents.

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