2. Lower your monthly payment

Lowering your interest rate could reduce your monthly payment, but another reason to seek refinancing to lower your monthly payment is if times have gotten tough and your financial situation has changed. It might make sense for you to lower your monthly payment so you can afford life’s other essential necessities. While the term of your loan might be extended to accommodate your request, a lower monthly payment might be worth it for your situation.

Payment Example

Lender A

• Current rate: 4.50%
• Balance: $10,000
• Remaining term: 60 months
• Monthly payment: $186.43
• Interest you will pay: $1,186 over the remainder of the loan term

Refinancing With Lender B

• New interest rate: 3.00%
• Balance: $10,000
• Remaining term: 60 months
• New monthly payment: $179.69
• Interest you will pay: $780 over the remainder of the loan term
• Savings: You will save $406 in interest and over $270 in payment amount over the course of the loan

Calculate Your Savings: See how a lower interest rate could save you money

3. Shorten the length of your loan

When you look at your monthly loan statement, it might seem like you’re not making any progress paying it off. The good news is you have options! Refinancing an auto loan gives you the chance to explore several options. Along with lowering your rate, and lowering your monthly payment, you also have the option to shorten the length of your loan term. Early Payoff Calculator: See how paying a little extra each month might affect your loan term Your monthly payment might increase, but you might be able to save money in the long term because you will make fewer payments and end up paying less interest. It’s recommended to speak to a financial institution if this is a good option for you.

4. your credit score has improved

If you got an auto loan when your credit score wasn’t the best, you were probably stuck with a higher interest rate. However, a stretch of on-time payments (at least six months) can have a positive effect on your credit score. Many financial institutions offer you free access to your credit score. View Your Score: Honor members can view their score 24/7 in online banking and on the Honor app You can also view your credit report for free once per year at www.annualcreditreport.com If you find your score has improved, it’s a smart move to explore refinancing.

5. are you happy with your current lender?

If you are not satisfied with your experience at the financial institution your auto loan is through, you should consider refinancing to another lender and see what they have to offer. While it’s not required, it’s recommended to make a few on-time payments before refinancing.