After the rush of your new car purchase has worn off, you may realize the original loan terms are less than ideal. Fortunately, you have refinancing options. Consider the following questions when determining whether it makes financial sense to refinance your car loan.
Your credit score is an important factor in determining the interest rate you qualify for, so you need to know your credit score to properly evaluate the potential benefits of refinancing.
Generally speaking, a lower credit score results in a higher interest rate. If you need to improve your score, you could focus on a variety of factors that contribute to your credit score, including on-time bill payments, amount of debt load and length of credit history.
If you refinance a car loan to a longer term, you may experience lower monthly payments. However, you could end up paying more in interest over time.
Be sure to closely read your original loan documents to determine if there are any prepayment penalties should you choose to refinance. Any penalties/costs should be included in your refinancing evaluation.
As part of the refinancing process, there may be additional costs related to any paperwork that needs to be filed with your DMV. Visit your DMV’s website or call to check on any potential fees.
