Can you refinance a car loan?

If you’re paying a high interest rate on your current vehicle loan, you may be able to save yourself some money. Here’s the low-down on what you might be able to do.

It happens to most Americans more often than you probably realize…some financial difficulties creep into our lives and our credit rating suffers. If you’ve had to purchase a vehicle with less-than-stellar credit, you may have been saddled with a higher interest rate and less-than-favorable terms. But good news – if you’ve turned your credit situation around, you might be able to refinance that car loan and save yourself some hard-earned cash.

What does refinancing a car loan mean?

To put it simply, it means replacing your current car loan with a new one. Typically, this means that the new lender pays off the old one and you make payments going forward to the new one. Most people choose this route because the new terms offer a lower interest rate, a lower monthly payment, or both.

When should you consider refinancing?

• Your credit score has improved. If your credit has gotten better since you first took out the loan, you may qualify for a lower rate.
• Interest rates have dropped. Market conditions change and rates fluctuate – if they’ve gone down, it might be worth looking into.
• Your monthly payments are too high. Refinancing can extend the term of the loan, reducing your monthly payment (though you may pay more in interest over time).
• You didn’t get the best deal initially. Maybe you were in a rush or didn’t shop around – refinancing gives you a second chance.

How do you refinance?

1. Check your credit score. Know where you stand before you start shopping.
2. Research lenders. Banks, credit unions, and online lenders all offer auto refinancing.
3. Gather your information. You’ll need details about your current loan, your vehicle, and your financial situation.
4. Apply. Submit applications to multiple lenders to compare offers.
5. Review the terms. Look at the interest rate, monthly payment, and total cost of the loan.
6. Choose the best offer. Pick the one that saves you the most money or best fits your budget.

Things to watch out for

• Prepayment penalties. Some lenders charge a fee if you pay off your loan early.
• Longer loan terms. A lower monthly payment might mean paying more interest over the life of the loan.
• Fees. Some lenders charge application or origination fees.
• Negative equity. If you owe more than your car is worth, refinancing may be more difficult.

If you’re in the Dayton, Ohio area and looking for your next vehicle – or want to talk about financing options – stop by SVG Auto Group. We have a wide selection of new and used vehicles and a finance team that’s ready to help you find the best deal possible.