To decide whether refinancing your car loan is the right option for you, consider the following factors: It’s likely you are looking for a lower monthly payment, or you seek the perfect refinance car loan. options. You may pay more in interest over the life of your loan if you have a lower monthly payment, however. If you’re considering refinancing your auto loan, here are six tips to consider.
- Penalties for early payments
Is there a prepayment penalty with your current lender when you pay off your loan early? In the case of a Bank of America car loan, you won’t be penalized for refinancing, but if you are, do the math: If the savings outweigh the penalty, refinancing may still be worth it.
- Refinancing considerations
Be sure to inquire about the specific terms of each bank’s refinancing requirements. Then you may be eligible for a refinance at Bank of America if you have a car less than 10 years old with fewer than 125,000 miles on it, and your loan balance is more than $7,500 ($8,000 if you obtained the loan in Minnesota). Refinancing your auto loan can save you money with our auto loan refinance calculator.
- Amounts of interest
In case you are eligible for a lower interest rate on your loan, you may want to refinance your car. In the case of the same or higher rate, refinancing is not recommended. Remember, though: Preferred Rewards customers and Wealth Management customers may be eligible to receive a 0.5% discount off their interest rate.
In the event of a dip in income, it makes sense to refinance car loan for a lower monthly payment. If you don’t have a budget, you should create one to keep control of all your finances. A lesser payment can help ease the strain on your monthly budget.
- Credit score
When was the last time you got a car loan? A lower interest rate may be possible if you improve your score. Find out what steps you need to take.
- Loan term
A refinance or extended loan term lowers your payments and keeps more money in your pocket – but over time, you will likely pay more in interest. As an alternative, refinancing to an interest rate that is lower at the same or shorter term as you currently have will make your monthly payments less.
You may want your “refinance car loan” option pretty soon. If your answer to “When is it best to refinance?” is “soon” we recommend reviewing our current loan refinancing rates and using our refinance calculator to determine if refinancing makes sense for you.