Buying a car can be difficult. You have to think about what vehicle is right for you, your overall budget and how the car fits into that, and finding the right auto financing for the vehicle you choose. With so much to keep track of, it’s not uncommon for people to make a mistake when buying a car. Too often people sign the paperwork for a car loan that’s not right for them. This is where refinancing can save you.
Agreeing to a loan that doesn’t fit your budget can lead to financial issues and ultimately could result in the repossession of the car if you’re unable to make your payments. Luckily there’s a way out. You can always refinance your auto loan and negotiate a better deal, but how soon after you sign the paperwork can you refinance?
You Can Refi Even if You Recently Bought
So you recently bought a new car. Well, you can even refinance your loan before you make your first monthly payment, though this doesn't occur often. It's best to make a payment or two because refinancing often requires that you owe less than the car is worth. This means your car will need to be worth more than the remaining loan amount. If you've already done that, then you can start the refinancing process today.
Watch Out for Prepayment Penalties
Some loans come with prepayment penalties. This means if you do refinance, you would have to pay numerous fees associated with those penalties, meaning you’ll pay more overall. Still, even with prepayment penalties, it can make sense to refinance your auto loan. In many cases, you can refinance, pay prepayment penalties, and still end up saving money.
It all depends on your personal situation and the rates and terms you get with your new loan. If you can secure a much lower interest rate due to an improved credit score or a significant drop in the interest rates offered by lenders, there may be a benefit to refinancing. If you have a loan with prepayment penalties, it's a great idea to get refinance quotes to find better rates without prepayment penalties. If they’re lower than what you’re currently paying, you may want to think about refinancing.
Avoid Pre-Computed Auto Loan Refinancing
According to the Consumer Financial Protection Bureau, a pre-computed auto loan is a loan where the lender requires the borrower to adhere to a set schedule for payments. This means the interest and principal portions of each payment are already predetermined and paying early or more each month will not have any impact on the amount of interest you end up paying. Because of the nature of pre-computed auto loans, refinancing would only increase the amount of money you have to pay.
Why Refinancing Soon Makes Sense
If you can get out from under a bad interest rate, and you've made payments so you owe less on your vehicle than it's currently worth, there's no time like the present to refinance. It's simple and you can have our lenders compete for your business. This way, you get the best rate for your situation as opposed to a situation where you may have felt forced to sign for a loan at the dealership where you first purchased your vehicle. Even if your credit score may not have changed, a better rate might just be waiting for you. Like they say, there's no time like the present.