Refinancing your car, truck, motorcycle, RV, or other vehicle can bring a number of benefits. Depending on your situation, refinancing could get you a better interest rate, lower your monthly payments, and/or adjust the duration of the loan to better align with your financial goals.
But how do you go about finding the right lender and securing the best terms possible for your new loan? Continue reading to learn the advantages of working with a credit union and how car refinancing can lead to short- and long-term savings.
When to Refinance
If your financial situation has changed, such as an increase in income or an improved credit score, it may be time to consider refinancing your existing car loan to take advantage of lower rates and better terms (or terms that are better suited to your current budget).
Because most auto loans are amortizing loans (meaning you pay them off through a series of fixed monthly payments, with interest costs built in and calculated based on your remaining loan balance), you end up paying most of your interest costs early on. This means the sooner you refinance and secure a lower rate, the more money you’ll save.
In nearly all cases, if you’re able to find a new auto loan with a better interest rate, it makes sense to refinance. However, it’s important to keep in mind that there may be other factors at play and you’ll want to do your research before you commit to auto refinancing. It’s not uncommon for lenders to charge refinancing fees when you pay off your loan earlier than expected. Thankfully, these fees are usually fairly inexpensive.
While rare, some lenders also include a stipulation that requires you to pay off some, or even all, of the interest along with your principal (this is often the case for precomputed loans, for example). In this case, you’ll need to crunch some numbers to make sure the penalties and fees don’t outweigh the benefits of refinancing.
Another reason people sometimes choose to refinance their car is to extend the life of their loan to lower their monthly payments. While this is sometimes the best option, keep in mind that doing this may increase the total amount you owe on your vehicle.
To summarize, here are some of key indicators that auto refinancing could be right for you:
Lower interest rate: If market interest rates have dropped, refinancing could save you money over the life of your current loan.
Improved credit score: A higher credit score than when you first secured your original loan can unlock better rates.
Lower monthly payments needed: If your budget has tightened, extending your repayment term can reduce monthly payments – though it may increase the total interest you’ll pay.
Better loan features: Modern auto loans may offer perks like no prepayment penalties or flexible payment schedules.
The Role of Market Trends in Refinancing
The automotive finance landscape has evolved in recent years. Factors such as inflation, federal interest rate changes, and economic shifts can directly impact auto loan refinancing options.
For instance, some lenders may offer competitive auto refinance deals due to drops in car prices or lower demand for vehicle loans. There are also other online refinancing options available. With digital platforms, borrowers now have access to instant quotes and comparisons, which streamline the decision process.
When researching car loan refinancing options, leverage online tools and calculators to estimate potential savings.
Benefits of Refinancing a Car with a Credit Union
When it comes to car loans, the options are nearly endless. Just about every financial institution seems to offer them, and it can become overwhelming if you don’t know what to look for or how to compare terms and lenders.
Unfortunately, many people limit themselves to big banks, which may offer better rates than car dealerships, but typically still have high fees, less-than-optimal rates, and a one-size-fits-all approach. In addition to serving their customers, banks are also focused on making a profit, satisfying shareholders, and paying corporate salaries.
Increasingly, borrowers are refinancing cars with credit unions. Here are just a few reasons why:
Better rates and lower fees
Because credit unions are member owned and not for profit, all surplus funds go back to members instead of generating profits for shareholders. This structure allows credit unions to offer lower interest rates and lower fees compared to traditional lenders. Over the life of your car loan, these savings can add up significantly! With a credit union, you’re also less likely to encounter hidden changes or unfavorable terms.
More personalized service
Unlike large banks that rely on standardized processes, credit unions take a more individualized approach to lending. You’re not just another account number with a credit union – you’re a valued member! This means credit unions will take the time to understand your unique circumstances, whether you’re dealing with a tight budget, need to adjust your repayment term, or want flexible payment options. You can also expect a dedicated loan officer to walk you through the refinancing process step-by-step to help you make informed decisions.
Easier approval process
Because of their individualized approach, credit unions have a more flexible approach to lending. Compared to big banks, credit unions are more likely to work with you even if your credit score isn’t the greatest. They’re also typically more open to finding solutions to whatever special circumstances you may find yourself. Finally, credit unions can often process applications faster than traditional institutions thanks to their smaller size and local focus.
Long-Term Relationship Building
Credit unions aim to build lasting relationships with their members. By refinancing with a credit union, you may gain access to additional financial services, like competitive rates on other products (personal loans, mortgages, credit cards). which can help you better manage your finances. Credit unions also often provide educational resources like workshops and tools to improve financial literacy.
Community Impact
Choosing a credit union means supporting an organization that reinvests in your community. This is an often overlooked benefit of working with credit unions but it’s something to keep in mind nonetheless. Many credit unions sponsor local events, fund educational initiatives, and prioritize local economic growth.
Refinance Your Car with Valley Credit Union in Salem, Oregon
Refinancing your car doesn’t have to be a stressful or complicated process. At Valley Credit Union, we work one-on-one with our members to understand their personal goals and tailor our products and services to their unique needs. We serve four counties in Oregon: Linn, Marion, Polk, and Yamhill. If you live or work in one of these counties, we would love to have you join the Valley family and save you money on your car!
We will beat your interest rate or lower your payment on any auto loan not currently financed through Valley Credit Union. If we can’t, we’ll pay you $500 in cash, so long as you’ve been a Valley member for at least 90 days.
Visit our Mission Street location in Salem, call us at (503) 364-7999, or contact us online today to get started!
About the Author
Justin Roberts, Vice President of Lending
Justin Roberts is our Vice President of Lending and has been in the financial industry for over 18 years. He is an Oregon State University Graduate and has just completed Western CUNA Management School. When he is not focused on helping the members at Valley, you will find him coaching his two sons and volunteering his time to help develop the youth in our communities through sports.