Refinance Your CAR at a Credit Union!

 

Do you suspect you’re paying too much for your car loan? It might be time to consider refinancing. Fortunately, most financial institutions that offer auto loans also offer refinancing. You’ll have your choice of companies, but because of their low rates and flexible financing options, you might want to consider a credit union first.

 What is Refinancing?

When you refinance, you transfer ownership of your loan from one creditor to another. You’ll apply to your new lender, and if you’re approved, they’ll pay your old institution your loan balance. Then you’ll send payments to your new lender each month. People often refinance if they find another lender that offers a more favorable rate than the one they’re currently paying.

You could use a lower interest rate in one of a few ways. You might lower your monthly payment, or you could continue to pay the same amount, and simply pay off your vehicle more quickly. Just try to avoid lengthening your loan term when refinancing – the process should save you money in the long-term, not cost you more.

When Should You Refinance?

Not every loan should be refinanced. It’s possible that you got the best rate on the first try, and there’s no need to take another look. However, if you’re in one of the following situations, you might want to give it a try:

·         Your Credit Has Improved. If you weren’t able to qualify for the best rate when you first applied for your auto loan, and your circumstances have changed, you should definitely try to refinance. Maybe you were able to pay down your credit card debt, or maybe you fixed a few errors on your credit report. If you haven’t tried to improve your credit, but you know it could be better, access one of your free credit reports to see how you can improve. After you’ve taken some positive steps, apply for refinancing.

·         Interest Rates Have Gone Down. Interest rates have been very low for years now, and it’s unlikely they’ve changed much since you applied for your car loan. Generally, though, lower interest rates are a great reason to refinance. It may not seem like much, but a few percentage points off your loan could save you thousands of dollars.

·         You Didn’t Shop Around. Even if your credit is fantastic, you may have been able to get a better rate without knowing. But perhaps you didn’t do your homework. Luckily, it’s not too late. Run your figures through the loan calculator at your local credit union to see how much you can save.

 Keep in mind that the younger your car is, the better your chances of getting a more favorable rate with refinancing. Credit unions and other financial institutions often charge one rate for late-model cars, and another for older models. You may still get a discount if you’re near the end of your loan, but typically, it’s better to refinance early.

 How Can a Credit Union Help?

If you didn’t finance your initial loan at a credit union, you should consider one when it comes to refinancing. According to the National Credit Union Administration (NCUA), credit unions often offer lower interest rates on auto loans than banks and other lenders, and many even provide guaranteed discounts or cash bonuses for refinancing with them. On top of this, credit union members report higher levels of satisfaction with the customer service they receive, compared with other loan recipients who go through banks or other financial institutions.

You usually have to be a member of a credit union to get a loan or a refinancing through them. The good news is that you probably qualify for membership. Most credit unions now base their membership on geography, rather than basing it on your employer or other organizational membership. If you live or work in a neighborhood or city served by a credit union, you’ll likely qualify for membership.

The Bottom Line

Refinancing isn’t always the best choice. It’s possible you don’t have much to gain from refinancing, or, worse, that it could set you back in your financial goals, rather than helping you reach them sooner.

But if you’ve recently improved your credit, or didn’t explore your options when you first applied, try to refinance with Tropical Financial Credit Union first. If you’re a new member, you’ll be pleasantly surprised by the service, and if you’re a long-time member, you might be surprised by how much you can save.

 

Alice Holbrook, NerdWallet