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Bills are a lot like bad weather. They’re going to come anyway, so you might as well not try to

fix them, right? For some bills, that is the case. For others, you can make a drastic difference in your monthly budget with a little legwork.

One of the bills you can change is your car payment. Refinancing your vehicle loan can lead to a lower monthly payment, a shorter term, or both! This depends on a wide range of factors, including the value of your vehicle, the balance on your current loan, and your credit standing.

If any of these factors changed since you purchased your car, you owe it to yourself to check out your refinancing options. Let’s look at three common life scenarios where refinancing makes sense for your car or truck:

1.) Your credit improves

One of the major factors in determining your auto loan status is your credit score. When your lender is building a loan package, a credit report is pulled as a central part of the process. Your score helps define your interest rate, whether or not you will have to pay a premium for insurance, and other fees your lender might charge.

Save a copy of the credit report your lender pulled. You can look back to see if your credit score improved. It takes about nine months of steady repayment to boost your credit score, which could result in a cheaper loan if you refinance.

If you did not have an established credit history when you purchased your vehicle, refinancing can do you a world of good. Interest rates as high as 18 percent are common for borrowers who have little to no credit history. Even a few months of solid payments under your belt can cut your interest rate in half or more.

2.) You didn’t shop around before you borrowed

Many people feel railroaded throughout the car-buying process. They pick a car they like and then they are told what the price is, what the monthly payment is and other details. It may seem like the choice of lenders for your car loan is predetermined.

Dealers tend to have a smaller range of lenders with whom they work exclusively. Those lenders know they have limited exposure to competition, so they can charge slightly higher fees and interest rates. By doing your own comparison shopping, you can save on both the loan and any ancillary insurances or warranties you may have purchased. Dealer rates tend to be one to one and a half percent higher than those offered at smaller lenders, like credit unions.

It is definitely worth shopping around for a car loan if you have not before. Getting multiple offers ensures you are getting the best price available for your loan. Try to do your shopping within a 15-day period. Otherwise, the multiple checks on your credit could negatively impact your credit score.

3.) You need to change your monthly payment

You may be in a stronger financial situation now than when you bought your car. You may have a better job or more income. You may have paid off credit card or other debt. All of these factors impact how much you can pay per month.

People do not refinance a loan looking to increase their monthly payment, but you can save yourself money in the long term by committing to a faster repayment plan. If you can afford to pay more per month now, you can pay off the balance on your car faster. Shorter term loans usually also have lower interest rates, since the lender assumes less risk in making the loan. After the car is paid off, you can devote all that money to other saving or spending priorities.

If money is tight, it may be a smart to refinance into a longer term. You may end up paying more in interest, but you can lower your monthly payment and save the money you need right now.

Auto loan interest rates are still at a historic low! If you are looking to refinance your current auto loan, stop by a River City Federal Credit Union branch and learn about our low interest rates. Talk to one of our representatives and find Stop by to find out how refinancing can significantly improve your financial life!

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