Should you refinance your auto loan?

You've likely heard about the benefits of refinancing an auto loan. With today’s dropping interest rates, those who have enough equity in their vehicles and the credit required for a refinance could lower their monthly payments considerably. Here are some things to know about auto refinancing and how to determine whether it could help you save.

Do you qualify?

If you’ve purchased and financed a car within the past few years, you could potentially find an auto loan with a lower rate.  

Has your credit score improved?

You could save even more if your financial situation has changed for the better – and your credit score is higher — since you took out that original car loan.

As with any loan, you do need good credit to qualify for auto refinancing. However, the criteria is less stringent than that associated with other types of financing.  

Are you in a lengthy loan (five- to eight-year term)? 

Many people only pay attention to their monthly payment when purchasing a car and have no idea how much of that payment is interest. The longer the term of the loan, the more interest you’ll fork over until it’s paid off, even if your monthly payment seems low. Refinancing into a loan with a shorter term will lower the total amount of interest you’ll pay, even if it doesn't considerably lower your monthly payment. Jack Nerad, executive editorial director and market analyst for Kelley Blue Book, advises anyone in a lengthy auto loan (with an original five- to eight-year term), to research auto refinancing.

How to get started

See how much you could save by moving your car loan to Pen Air Federal Credit Union. You could save up to 2% off your current rate and, during the month of May only, make no payment for 90 days by refinancing your auto loan with us. ¹ Visit penair.org/AutoLoans or stop by a branch near you for complete details.

¹APR = Annual Percentage Rate. All loans subject to credit approval. Auto loan must be transferred from another financial institution and be in good standing for at least 6 months. Rate will be reduced up to 2% but will be no lower than 1.99% APR. Offer valid on loan applications submitted May 1 – May 31, 2014. Interest will still accrue with the No Payments for 90 Days offer. Other conditions and restrictions may apply. Contact Pen Air FCU for details.

Sources: KBB.com, Edmunds.com, BALANCE Financial Fitness Program