When we think of auto loan refinancing, we think of very wise, sophisticated individuals who clearly know how to take care of their money. But what about the rest of the population? Do younger people refinance their auto loans and if so is it for the same reasons that someone who has experience with this does?
We asked around and were introduced to Valerie. A young woman living in Fort Lauderdale, who had a story that most millennials could probably relate to. Here’s how she refinanced her auto loan and how it helped her monthly budget.
Valerie’s Auto Loan Refinancing Story
“The summer I got out of college I was working my first job at a doctor’s office. I went to Nova for nursing, so until I felt ready I just wanted to get my foot in the door. One day I was on my way home from work and one of the worst things happened to me.
Like typical Florida, I got into a car accident by another driver who was texting and driving. I was so shocked by what happened that the first thing I did was call my mom. The rest of that night is kind of a blur at this point, but all I could remember was thinking how am I going to get another car? My student loans were just about to kick in, in a couple of months and between that and rent, I wasn’t sure how I was going to afford something else. My parents were and still are helping me with a couple small bills like my cell phone and car insurance, so the rest was really up to me. I had used most of my savings to pay off a balance I had pending in order to graduate, so I just felt kind of stuck.
When we had gone to the dealership I found a car that I really loved and being young, that’s what I wanted and didn’t want to hear what anyone had to say. Since I didn’t want to hear what anyone had to say, the guys at the dealership really had to try to work out a deal for us when it came to auto financing. Luckily, my credit was good, but not having a down payment really hurt me and it showed in the financing. I ended up with a high payment and an even higher interest rate which wasn’t fun.
A couple years had gone by and I finally was in a new, more permanent role where I was making more money, however my student loans kicked in. Making more money was a little better, but with my loans, rent and car payment I was feeling a bit stretched too thin. If I wanted to grocery shop, I still had to buy the same foods I was eating in college and there were a couple times where friends from work had asked if I wanted to go out to lunch and I couldn’t.
I ended up doing some research online and found an article on ThePenneyHoarder.com about refinancing an auto loan and how it helped that person. At this point, I figured, hey, it’s not like I have anything to lose so I did a quick search for auto refinancing in Florida and stumbled upon a place. The process was fast and easy and they explained since I now had a down payment and more established credit, that’s how I was able to get into a new auto loan with a lower payment and lower interest, but the terms are still the same, however I’m almost ready to pay off my car and have freed up a little bit of my budget which I now have an extra $100 a month to allocate as I please thanks to my refinance.”
How Was Valerie Able to Save $100?
Valerie explained to us that the place she looked into to refinance her auto loan took the time to explain all the details about refinancing and the different aspects of how it could save her money.
It’s very common for people to refinance in order to save money in some way and in order to do so there’s a couple things lenders might suggest. For example:
Putting More Money Down
Putting more money down on any loan will always help to bring down monthly payments. However, since this is an auto loan a little more than just $50 bucks is needed to save money. If you have a couple thousand to put down on a refinance that’s generally the kind of amount that will bring your payment down by hundreds.
Research Different Interest Rates
Having a lower interest rate will help to save you more money on the overall loan. Normally people will look into refinancing with interest rate in mind if their credit wasn’t where they wanted it to be when they originally got their car. If you’ve worked on your credit and it’s in a better spot, you have the potential to qualify for a better rate and save money.
Extend the Terms Out
If you know you don’t want to trade in your car for some time, looking at extending the terms can help to bring down your monthly payments as well. Since the loan would be spread out over more time, so would the payments which makes them less. When extending the terms another thing to consider is how much interest is being paid overall. Even though your monthly payments would be lower, would what you pay on the overall payment increase or decrease?
In Valerie’s specific case, she had some more money to put down and worked on improving her credit so that her interest rate wasn’t so high. Even if you aren’t in a situation like Valerie and you still like the idea of being able to save more money per month without reworking your budget, refinancing an auto loan is a great place to start.