5 Reasons to Refinance Your Car Loan with Lanco FCU
Sometimes we all need to sit behind the wheel, crank up our favorite tunes, roll down the windows, and drive on some backroads in Lancaster County. But when your auto loan monthly payments are causing stress—whether because they’re taking up too much of your monthly budget or you’re paying too much in interest—it might be time to refinance.
There are plenty of good reasons to refinance a car loan, especially with a credit union like Lanco Federal Credit Union. Because we operate as a not-for-profit organization, we can offer competitive rates on our lending products, including automobile refinancing.
For over 55 years, we’ve helped more than 10,000 members who live, work, worship, or learn in Lancaster County achieve their financial goals by promoting their economic health and providing affordable credit. Please become a member of our credit union and experience all the benefits of being a part of our extended family.
1. Lower Interest Rates
One of the most popular reasons to refinance your car loan is to get a lower interest rate. Today’s rates may be lower than when you first financed your vehicle, or you financed your vehicle loan through the dealer, not realizing how high the interest rate was. Refinancing your auto loan to a lower interest rate can save you money over the life of the loan.
In both examples outlined in the tables above, you can see that you will potentially enjoy decreased interest paid over the life of the loan with the new loan terms.
2. Lower Monthly Payment
Even if that savings in interest wasn’t enough, a lower car payment each month is another one of the popular reasons to refinance a car loan. As you can see in the example above, automobile refinancing likely also reduces your monthly payment, making it a much more manageable amount in your monthly budget.
One important caveat is that your car decreases in value the longer you have it. When you refinance a car, you may end up owing more on the loan than the vehicle is actually worth. It’s important to note that this scenario can happen even if you don’t refinance.
3. Your Financial Situation Changed
A third popular reason to refinance a car loan is that your financial situation has changed. Perhaps you’ve worked hard to improve your credit report, and as a result, your credit score has increased. At lenders like Lanco FCU, the higher your credit score, the lower APR you may receive.
For example, a 2016 vehicle with a 60-month loan term has an APR of 8.74% for credit scores between 620 and 659 at Lanco FCU. Let’s say that you raise your score to 700. In that case, your APR can now be 4.74% for the same car at the same loan term.* With these savings in interest, you might even be able to pay your loan off in a shorter term, resulting in even greater savings.
Another change will be if your income has increased significantly. You may be able to afford a higher monthly payment, so you want to refinance to a shorter loan to pay your car loan off even faster. In this case, it might make sense to refinance your loan to a lender like Lanco FCU, where you have the freedom to pay more each month and get your car paid off sooner. However, if your current loan has a prepayment penalty, refinancing would pay off the loan early and you may be subject to the associated penalties.
On the opposite end of the spectrum, if your income has decreased due to a job layoff, illness, divorce, or other reasons, refinancing your car to get a lower payment may be an option. Check out our refinance calculator to obtain a full picture and ensure you won’t pay more interest over the life of the vehicle loan.
4. Debt Consolidation
A fourth good reason to refinance a car loan is to consolidate debt. Between your monthly car payments, personal loans, and credit cards, it’s enough to make your head spin to keep track of all your expenses and due dates. Some lenders may allow you to consolidate all this debt into one low monthly payment for a longer term, resulting in less stress for you.
Personal loans are often a good option for debt consolidation, but if you have untapped equity in your car or truck, a vehicle loan can offer additional benefits. With your vehicle used as collateral to secure the loan, you may get a better interest rate than what you currently pay on your individual debts. Get in touch with our team today to discuss this option for you.
5. Change Loan Terms
Finally, a fifth reason to refinance a car loan is to change the loan terms. Besides possibly lowering your APR or monthly payment, your original car loan might have a variable APR. This means that the interest you pay fluctuates depending on the current rate. It puts you at risk if rates increase dramatically, causing you to spend more on your average monthly payment.
When you choose a lender who refinances loans like Lanco FCU, you’ll enjoy a fixed rate for the life of the loan term, so you can rest assured you pay the same amount each month.
Take Advantage of One or More of These Reasons to Refinance a Car Loan
Whether you’re interested in paying less each month and over the life of the loan or want to use your vehicle to obtain a low rate to consolidate debts, automobile refinancing can be a great option. We covered just five reasons to refinance a car, but there are many others. No two individual situations are the same, which is why Lanco FCU takes a personalized approach with each of our members.
Choosing a credit union like us over a traditional bank for your refinancing is a smart choice. Not only do you enjoy the perks of being a part of our credit union, but you can also open a Kasasa checking or savings account for easy monthly payments from your checking account to your loan payment. Get started today by visiting one of our branches or applying online and becoming a credit union member! Pretty soon, you’ll be cruising down some backroads jamming to your favorite music without worrying about your monthly payment.
*Advertised APRs accurate as of 9/9/2022 and may change at any time. Payment examples: A $30,000 car loan at 8.74% APR would require 60 monthly payments of $618.97. A $30,000 car loan at 4.74% APR would require 60 monthly payments of $562.57.