Paying outrageous loan amounts can be difficult when you’re trying to save money every month. If you’re looking for easy ways to cut costs, refinancing your car loan may be a good start. This can be a great option if you’re planning on keeping your car for a while and want to lower the monthly burden. Here are a few ways to recognize when the time is right to invest in better financing terms.
Trade-In Offers Arrive Regularly
If you’re constantly receiving ads from dealers wanting you to trade in your old car, then that vehicle may have a higher value than you realized. These dealers aren’t just trying to get you to buy a new car; they probably have buyers looking for your old one. Sites like Autotrader.com and Kelley Blue Book are great tools to help you get an appraisal of your car’s worth.
Interest Rates are Low
Interest rates change regularly, and the rate you received a few years ago may easily be higher than the going market rates today. However, instead of choosing shorter payments over a long period of time, it may be more beneficial to choose a shorter payment period with slightly higher payment amounts, that way you'll be paying less in interest over time.
Your Credit is Improving
Keep an eye on the credit offers that arrive in your daily mail because they can tell you which direction your score is moving in. If you’re receiving offers for pre-paid cards with high interest rates, then you probably won’t find very attractive financing for your car. However, if you’re starting to see offers for low interest rate and zero-percent introductory terms, then you’re credit score is probably increasing. This could be a great time to start calling around to see if you can find a better rate on your car.
You’re Struggling to Meet the Payments
While refinancing your auto loan can potentially save you hundreds a year, it’s only really beneficial if your credit has improved. Don’t look to extend the length of your loan, especially if you aren’t planning on keeping the same vehicle for the next few years. If you're having a hard time coughing up the money for your car's monthly payments, it may be beneficial to start looking for other ways to save money. The non-profit credit experts at CreditGuard.org, for example, are able to help people lower their interest rates and pay off their debt faster. If you're behind on your car payments, or if you're in danger of falling behind, this could be a good approach for you.
Remember, if you’ve been looking at the car note and wishing it was lower, it may be worth it to refinance the loan. Knowing when to talk to the finance companies can help you find a better term and minimize the number of times that your credit report is reviewed.
*This article was co-authored by Maria Rivera, who has spent the last 13 years helping people overcome their financial hardships. She currently manages CreditGuard of America’s credit counselors and helps prepare individuals who are seeking their credit counseling certification. A resident of Boca Raton, Florida, Maria is always on the lookout for great new recipes and beauty tips. She's also a self-admitted pop culture junkie. You can follow the latest from Maria over on Google+.