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If you used financing to buy your vehicle, you may want to consider refinancing your car loan at some point. Doing so could end up saving you money by lowering your monthly payment, interest rate, or both. However, while it offers many benefits in the right situation, it isn’t necessarily the best option for every borrower. Here are three main reasons this might be a smart move for you to make. 

When Refinancing a Car Loan Makes Sense

1. Your Credit Score Has Improved Significantly 

Many factors influence your credit score. You may not have had as high a score when you first applied for your car loan as you do now. If your credit report is showing significant improvement since you purchased your vehicle, lenders will view you as less of a risk, which means you might qualify for a lower interest rate. 

2. Your Income Has Increased 

car loanWhen you apply for a car loan, lenders look at your debt-to-income ratio. This is the total amount of monthly debt payments you’re responsible for divided by your monthly gross income. If this number is high, it typically means you’ll receive a higher interest rate. If your income has recently increased, thereby decreasing your debt-to-income ratio, this can also make you eligible for a reduced interest rate. 

3. Interest Rates Have Dropped 

You might also want to consider refinancing if current interest rates have dropped since you took out your loan. Just like credit scores, interest rates fluctuate. It’s possible for even a small change in percentage points to garner you considerable savings over the life of your loan. 

 

Should you decide to refinance your car loan, the next step is finding a lender who will offer you the best rate. This is why many borrowers in Passaic County, NJ, turn to North Jersey Federal Credit Union. For more than eight decades, this financial institution has been providing its members with the lowest loan rates available. They’ll help determine if refinancing is the most suitable solution for your situation and guide you through the application process. Call (973) 785-9200 to learn more about your options, or visit their website to apply today. 

 

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