It is a fact that most people buy cars using loans. This is because sometimes your financial status may not allow you to purchase your favorite car. Considering the fact that there are many companies willing to sell cars on loan, there’s no need to struggle or wait until you have enough cash.
There are several reasons why people often refinance car loans. The most common reason is to reduce the monthly car payments as well as the interest rates. But the reasons to refinance a car differ from one person to another.
Below are the reasons why most people refinance car loans:
1. To lower the interest rates
Chances are high that the interest rates have gone down from the time you bought your car or maybe you have come across lower rates somewhere. You were probably financed by a dealer when buying a car for convenience purposes and at that time you didn’t pay much attention to the high interest rates.
After all, the main goal of dealers is to make profits. They will do anything to convince you to purchase a car with higher interest rates. Refinancing can be a great option, especially if the rate difference is considerable. You can save a lot of money for the remaining part of the loan. There could also be rate discounts when you sign up for services like automatic loan payment and direct deposit.
2. If your credit score has improved
This is also another reason why people refinance car loans. Maybe your credit score was relatively low when you applied for a car loan. But since then, you have done several things and significantly improved your credit score. You can approach different lenders and find out if you are eligible for a lower interest rate. This will save you a good sum of money for the remainder of the auto loan.
3. You would like to alter your monthly payments
Sometimes, it is difficult to foresee some situations. Your financial situation may change all of a sudden after applying for a car loan and your budget becomes strained. Opting to refinance with a lower interest rate can reduce your monthly payments and make things manageable.
But you should understand that as your car depreciates, you will owe more on the loan compared to the actual value of the car. That’s why it is important to do your math properly before making the final decision.
4. If you want to remove a co-signer
This is also another scenario that often prompts people to refinance car loans. If one of the requirements for your car loan’s approval was a cosigner, then refinancing can be a good option. This is necessary if your credit score has improved and you are able to refinance without necessarily having a cosigner.
The reason to refinance a car loan can boil down to an individual’s financial situation. If you want to refinance your car loan with Lantern by SoFi, then ensure that you have properly assessed your financial situation. Refinancing from Lantern Credit is good because it helps you save money.
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