Car loans can be cumbersome, and your financial situation can change at any point. Auto loan refinancing is a great tool for those who are looking to obtain a lower monthly payment, lower interest rate, or to free up more cash from their vehicle. If you haven’t considered refinancing your car, you may want to.
Can I Keep Refinancing My Loan?
One of the most common questions that borrowers have after learning about the advantages of refinancing their car loan is “how many times can you refinance a car?”. According to Lantern by SoFi, “When it comes to refinancing your car, you can do so as many times as you want.” The only limitations are your credit score and the value of the vehicle.
Lowering Your Interest Rate
Probably the most common reason that people opt for refinancing their auto loan is to lower their interest rate. As one improves their credit score over time, one can become eligible for lower interest rates than before. Additionally, auto loan interest rates can fluctuate over time. When they hit lows, it’s typically best to refinance. The lower the interest rate you can get on a car loan refinance, the more money you’ll save over the total life of the loan.
Reduce Your Monthly Payment
When you first took out your loan, you may have been in a different financial situation. Whether it’s a decrease in your income or an increase in your monthly expenses, you may find that your original monthly payment amount is too high. You can opt for refinancing your vehicle to reduce the total monthly payment. To reduce the payment, in most loan scenarios, you’ll need to refinance your auto loan for a longer term.
To Free Up Cash
If your auto loan amount is significantly less than the value of your vehicle, you have a lot of equity in your car. Refinancing your car for a higher loan amount can allow you to free up some of that equity. For example, if your car is worth $15,000 and your existing loan is down to $5,000, you may want to refinance your car loan for a total of $15,000. This will put $10,000 in your pocket.
To Obtain a Fixed-Rate Loan
When you apply for an auto loan, you’re given a choice between a fixed-rate loan and a variable-rate loan. With a fixed-rate loan, the interest rate that you pay remains the same over the life of the loan. This means that you have a predetermined monthly payment that you’ll owe each month for the loan term.
Conversely, a variable-rate car loan’s interest rate will fluctuate with the market. This means that your monthly payment amount will also fluctuate based on the changes in the interest rate. If you initially took out a variable-rate car loan, you may have discovered that the interest rates are too high and, therefore, your monthly payment is too high for your budget. Refinancing your auto loan can allow you to switch to a fixed-rate loan with a predetermined monthly payment amount.
The above are just some of the most common reasons that people opt to refinance their vehicle loans. The whole idea is to utilize the refinance process to enhance your financial well-being.