Are you drowning in high payments on a high-interest car loan that you just can’t afford? Were you one of those car buyers who smelled the new interior, gasped at all the gadgets, took a test drive, and just wanted to hit the road in your new car regardless of the cost or financing rate? Like many others in your place, after the initial enthusiasm wore off, you realized the interest rate was higher than you expected and now you’re tightening your budget.

You may want to think about refinancing your vehicle. Refinancing could save you money if you qualify for a better rate. And, at a credit union, you can benefit from more flexible payment terms and, of course, more personalized customer service.

How does refinancing work?

The process is similar to refinancing your home, only much simpler. Just like a home refinance, you’re using a loan from another lender to pay off an existing loan, and you’re doing so at a much more affordable interest rate. The goal of refinancing is to get a better deal. A lower interest rate could lead to hundreds of dollars in savings, while a longer term can make paying down debt easier on your budget.

When does it make sense to refinance your vehicle?

• If you didn’t get the best available interest rate the first time. Maybe you were in a rush to buy your vehicle and didn’t first shop around for the best rates with local lenders. Credit unions in particular are known for offering favorable interest rates on auto loans to their members.
• An auto refinance can be helpful for those who are saddled with high-interest loans due to a low credit score, poor credit history, or unemployment. Provided you haven’t missed any payments, it’s worth seeing if you can get a more attractive rate this time.
• If your financial situation has changed since you initially took out your loan, it may make sense to refinance your car. If your credit score has improved, even by just 50 points, that improvement can earn you a lower interest rate.
• Maybe you discovered an error on your credit report that cost you a better rate. If that error has been corrected, it may be a good time to refinance your vehicle. You can check your credit report for errors at AnnualCreditReport.
• If you only have a year or two left on your car loan, it may not make sense to refinance into a new loan with a longer term. But if your goal is to lower your monthly payments, a refinance may be the way to go.

Why refinance through a credit union?

• Because credit unions are not for profit, they work exclusively for the benefit of their members and often offer unique loan programs that might not be available at a traditional bank.
• Lower Interest Rates – In a credit union, profits are passed on to its members in the form of lower rates and fees. According to the National Credit Union Administration, the average auto loan from a credit union was 2.61% lower than the average bank.
• Flexible payment terms: Many credit unions offer financing for up to 100% of the vehicle’s value and provide numerous payment options.
• Loan Protection Products – You can usually purchase GAP coverage from the auto dealer. If you buy that insurance from your credit union, you can usually save hundreds of dollars for this helpful protection.
• Skip-A-Pay: Credit unions allow their members to skip a loan payment from time to time if they are faced with a financial crisis. You can forget about asking a car dealer for that kind of special treatment.

What’s better than a lower rate and a lower monthly car payment?

Since the auto refinance application only takes a few minutes to complete and the entire process is not a burden, you have little to lose by trying to get a better deal. So if you love your vehicle but not your loan, it might make sense to refinance your loan with your local credit union.