5 Reasons to Refinance Your Car Loan with Lanco FCU

If you love to drive, you’ve probably enjoyed turning on some music and coasting along the backroads of Lancaster County. But it might be time to refinance 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.

There are plenty of good reasons to refinance a car loan, especially with a credit union like Lanco Federal Credit Union. When you choose a not-for-profit organization, you get more competitive rates on 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. When you become a member of our credit union, you will get to experience all the benefits of being a part of our extended family.

1. Lower Interest Rates

Are you struggling to keep up with a high-interest-rate car loan? 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 maybe you’ve significantly improved your credit score since that time. 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

If you feel overwhelmed by large monthly payments, then refinancing is a potential solution. As you can see in the example above, automobile refinancing with a lower rate typically reduces your monthly payment, making it a much more manageable amount in your monthly budget. Another option you may consider, if you need to drastically reduce your payment due each month, is to refinance into a loan with a longer term. A lender can help review the options available to you, so you can decide how best to reach your financial goals.

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 – often called going ‘upside down’ on a loan. It’s important to note that this scenario can happen even if you don’t refinance.

3. Your Financial Situation Changed

Since your initial loan, how much has your financial situation changed? Improved credit scores, changes in employment, or even windfall inheritances are all reasons to consider if it’s time to refinance. If you’ve built up an improved credit since your original loan, refinancing might be particularly useful.

With lenders like Lanco FCU, the higher your credit score, the lower the APR you may receive. With the lower interest rate, you might even be able to pay your loan off in a shorter term, resulting in even greater savings.

Another change might be if your income has increased significantly – maybe you have a new job or received a big promotion. You may be able to afford a higher monthly payment, which would allow you to pay off your car loan 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. Ensuring that you can afford your monthly payment within your budget allows you to continue on-time payments and is essential to maintaining a good credit reputation. Check out our refinance calculator to obtain a full picture and consider the benefits of refinancing your vehicle loan.

4. Debt Consolidation

When consolidating debt, you should consider refinancing your car loan. 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 a vehicle loan can offer additional benefits if you have untapped equity in your car or truck. 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, you might consider the fifth reason to refinance a car loan, which 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. Variable APR rates can sometimes change drastically, 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.

Editor’s Note: This blog post was originally published on Sep. 19, 2022. It has since been updated for accuracy and comprehensiveness.