When should I consider refinancing my auto loan?

There are a variety of circumstances in which you may seek to refinance an auto loan, but the underlying reason is almost always the same: To save money.

Obtain a lower interest rate

The most obvious and common reason for an auto loan refinance is to save money on interest costs. If interest rates for auto loans are currently lower than the rate that you currently have, it may be time to consider a refinance. Or if you believe that your credit score has increased to a level that will increase your chances of being approved for a lower-interest loan, refinancing may be a good option.

Lower your monthly payment

Another common reason to refinance is to lower your monthly payment. This can be done in a variety of fashions, including:

• Obtaining a lower interest rate, as mentioned above.
• Extending the payment term on your existing loan.

Considerations

Whether or not you will benefit financially from an auto loan refinance depends on many specifics. With that in mind, here are a few things to look for when considering a refinance:

• Make sure that you will not be charges any prepayment fees by your existing lender.
• Be aware of any additional fees that may be associated with a refinance, including registration and lien holder fees.

See also: Who should refinance a car?