financial planning

How To Lower Interest Rates on Car Loans

The best way to get a lower interest rate on car loans is refinancing. Refinancing auto loans can lower monthly payments and free up major money for life’s other adventures. Read on to learn about how a refinance can save you interest or lower your monthly payment, and see if it’s the right move for you.

it’s not a want. it’s a need.

While it’s difficult to compare our cities to other metropolises like NYC or San Francisco, our public transit, even with its continuous improvement, is often a last resort rather than a go-to option like it is in other dense urban areas. Arizona is a sprawling state where everything is very spaced out, and taking public transit could add substantially longer commutes and an increase in difficulty getting to where you need to go. That makes having a car in Arizona more than a convenience—it's an essential.

There’s a lot that goes into owning a car, but it often starts with a car loan. There’s a certain excitement that comes from driving your first car off the lot, but the joy fades when that first monthly car payment comes due, reminding you of the financial commitment you've undertaken. Sometimes the need to finance a vehicle outweighs the numbers you sign on the dotted line for, but you don’t have to stick with a bad auto loan. Refinancing your vehicle loan could be the easy street you’re looking for to save money and cruise to financial freedom.

the basics of refinancing auto loans

So how does refinancing a car work, and is refinancing a good idea? Refinancing a vehicle is a simple process that involves replacing your current car loan with a new one, usually with better terms such as a lower interest rate. This might just sound like shuffling debt around, but here are 4 compelling reasons to consider new auto financing in your financial strategy.

#1 - Lower Interest Rates, Higher Savings

If your credit score has improved since you first secured your auto loan, refinancing could qualify you for lower interest rates. Sure, it means we get less money, but we’re a credit union–your financial wellness is kind of our whole brand. 

#2 - Monthly Payments Down, Monthly Cash Flow Up

In an economy where wages haven’t kept pace with inflation since the 80s, a once-affordable car payment can become a heavy burden. When you refinance your car loan for a lower rate or longer term, it means lower monthly payments, making it more manageable and less soul-crushing.

#3 - Your Life Changes, So Can Your Car Payment

On the other hand, maybe you’re one of the lucky ones who has seen an increase in pay and can now afford a larger monthly payment which will help you knock that debt out even sooner. A vehicle refinance can help you reduce your loan term to better align with your current budget. 

Refinancing your car loan isn't just about saving money, though—it can also simplify changing who's in the driver's seat, legally speaking. Whether it's due to marriage, divorce, or passing the keys to a family member, refinancing lets you adjust the loan and transfer ownership smoothly. This way, the new owner can take over the payments and benefit from loan terms that match their financial profile. It's a smart, streamlined way to shift gears on your car's ownership.

#4 - Leverage Equity for Financial Flexibility

Cars don’t age like fine wine. Though, owning one could still offer financial benefits. Like a house, your car has equity. For many, it’s negative equity because of how quickly a vehicle can depreciate, plus all the additional dealer fees and vehicle addons.

However, if you had a down payment or tend to make extra loan payments, you may have equity that could be tapped into when you refinance your car, which can be used on large expenses or debt consolidation, often at a lower rate than credit cards or personal loans.

some things to consider

Explore whether refinancing your auto loan is the right financial move for you with these essential tips on managing fees and understanding the impact of your credit score, credit report, and credit history. Be sure to run the numbers and calculate potential savings with our auto loan calculator before applying or diving into the endless pool of online lenders.

Learn about the importance of vehicle value, shopping around for the best rates, and understanding when is the best time to refinance. Credit unions are a great resource for lower rates, helpful information, and promotional offerings. Read more here to see if an auto loan refinance is right for you.

how to refinance a car loan for a better interest rate

The steps for how to refinance an auto loan are surprisingly straightforward. To get started, shop around and compare multiple lenders to find the best auto loan rates and terms. When you’ve found a winner, have these key pieces of information ready for when you go to apply: your current loan details (lender, interest rate, remaining loan balance, monthly payment), proof of income, and your car’s make, model, and mileage. 

Once you have your loan approval and all required documentation has been received, your new auto loan lender will pay off your existing loan, and you start making payments on the new and improved loan. It’s quick, easy, and can provide immediate financial relief.

Refinancing is not about shifting debt. It’s about taking advantage of loan solutions that better suit your current needs and goals, so you can enjoy the adventures that come with that car you dropped a heavy dime on. A vehicle refinance is a quick and easy process that can help you lower your car payment, adjust your loan term, or tap into your car’s equity, which all lead to improving your financial wellness and freedom from debt.

Apply today to refinance your auto loan with SunWest, and for a limited time, get up to 90 days no payment and a discount of 2.00% APR*

*APR = Annual Percentage Rate. On approved credit. Certain terms, restrictions and conditions apply. Refinanced loan interest rate cannot be lower than 5.79% APR when refinancing up to 2.00% APR below your existing rate. The first payment may be deferred for up to 90 days. Your loan will accrue interest during that time. Proof of current loan rate may be required prior to closing in order to receive the refinanced rate. Offer is for vehicle refinance applications processed before August 2024. This offer does not apply to vehicles currently financed through SunWest Federal Credit Union. Rates are subject to change without notice. SunWest reserves the right to modify or discontinue a portion or all of this promotion at any time.

April 25, 2024

Published by SunWest Credit Union

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