Buying your first car generates an incredible feeling of excitement and achievement. As a first-time car buyer, a lot of questions need the right answers to make your purchase worthwhile. And if it is your first car buyer loan, it makes it more significant to do thorough research.
Looking for the right car is not enough. You also need to get the best first-time car buyer loan that suits your credit scores, loan terms, interest, and monthly payments. In case you missed getting the best and the most suitable first-time car buyer loan, don’t be dismayed and disheartened. There is always the opportunity for Refinancing your car loan.
Why and when to refinance your car loan
- You are unhappy with the current rate/terms.
There are times when you rush into a deal with the lender without properly going through the loan terms. Then you realize you made a bad deal, and you wish to change that. There may also be an instance when you get the best rates of the day. Then after paying for a few months or a year, you come across a better deal that suits you.
- Your income has improved.
Possibly your financial position has improved, and you want to change the loan terms to suit your income. The primary purpose of refinancing is to save money. With higher monthly payments, you can get lower interest rates and a better credit score.
- Change your lender
Poor customer service and mismanagement by the lender is stressful. You not only have to deal with the monthly payment but also the customer services of the lender. It causes many first-time car buyers to look out for another deal with a new lender.
- Better offer from other lenders.
There may also be an opportunity for a better deal or offer by other lenders and credit unions. You can opt to refinance if you find other lenders and credit unions with a better offer that could relieve your financial pressure. Just make sure that after the loan process is over. The old lender reports the amount as fully paid.
- Better Credit score
The credit score is an essential factor in any loan as it determines the offers and the rate of interest you qualify. Possibly your credit score got better since the time you purchased your first-time car buyer loan. Paying on time for few months could boost your credit score. You could not only qualify for some good deals but also qualify for a lower interest rate.
- Lower interest rates
Interest rates fluctuate according to the market. Suppose there is a slight drop in the loan rates. You have a chance of saving more from the interest you are currently paying.
- Change the loan term.
Suppose you happen to face an unprecedented situation that has affected your monthly budget. You can refinance your car loan to a more extended loan period to cut down your monthly payments. You can also opt for a shorter loan period to cut down on your interest rate. You have to keep in mind that longer-term could cost you more.
Refinancing your car loan may be a good option if you are going through a rough patch or finding a better deal. It is to save money or to improve your financial burden.
A few things to keep in mind are:
- Be mindful of the penalty charges when you go for refinancing if you are changing your lender.
- Find out the customer service and the reliability of the new lender when opting for refinancing.
- Don’t change just because you get a lower interest rate.
- The process of refinancing is almost like applying for a new loan. You need to have a decent payment history to avail a good deal.
- The older the vehicle gets, the harder it becomes to get a refinance. The value of your car depreciates as years pass by.
Trying to refinance with bad credit is difficult, but there are specific programs for them as well. Make sure to get the lowest interest rate with the shortest term.
