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should you refinance your auto loan?

Refinancing can save you a lot of money over the lifetime of your loan. And there are other benefits as well. But should you refinance your auto loan? And how do you know when? If you are considering this option, you must time it right. Ensuring that you apply for your refinancing at the right time will help you land the best possible deal.

While your financial situation will determine the outcome of this question, there are a few general circumstances that provide the perfect opportunity to borrow and enjoy lower rates and better terms. Keep reading for the indicators that you are ready to apply for refinancing.

Credit Score and Interest Rates

We all know that credit score plays a big part in the interest rate you receive on an auto loan. If there have been any changes in these two areas, a refi may be a good option. An increase in your credit score provides the perfect opportunity to refinance and save on both your monthly payment and the overall interest spent. Even an increase of 20 to 30 points on your credit score can make a huge difference in the rate that you qualify for and your overall financial situation.

Likewise, if national interest rates have changed across the board, you should be able to easily decrease the monthly payment by scoring a new lower interest rate. As long as your credit score has not decreased, you can benefit from refinancing when the federal prime rate and most lenders’ rates are low. At ALEC, our members enjoy rates beginning as low as 4.99%% APR*. The perks of applying for an auto loan through ALEC include instant approval when you apply online, flexible terms of up to 84 months, no prepayment penalty, and 24/7 customer support.

Change in Income

Sometimes, life circumstances necessitate refinancing. If you have experienced a job loss or a sudden decrease in your income, it becomes even more important to lower that monthly payment. In this case, you can take out a new car loan with an extended term to spread out your repayment over a longer period.

For example, if you had 36 months left on your original loan, you may be able to refinance with a 72-month term and cut your monthly payment in half. This could help ease any financial pressure. If your income has changed for the better, you can still benefit from a refi. This can help you shorten your term so that you pay a higher monthly payment but pay less in interest overall.

A Better Deal

It can sometimes be as easy as spotting a better deal. Shopping around to different lenders can be a smart idea, even if your credit score and the interest rate have stayed the same. Lenders have a motivation to offer consumers good rates in exchange for moving over their auto loan. In addition, if your original loan was from a large national bank, you may have better luck from a smaller local bank or credit union that offers competitive rates. It always pays to shop around when it comes to obtaining a new vehicle loan or other financial product.

Removing a Cosigner

Another reason why many people may decide to renew the financing of their auto loan is if they need to remove someone from the loan. This could be due to a divorce, a marital separation, or simply a cosigner wishing to be removed from financing. In many cases, since a refi is essentially taking out a new loan, refinancing is one of the few ways to remove a name from the loan altogether.


While you can technically refinance at any time, it is generally recommended waiting at least six months before attempting to apply for a refi from another lender. This allows time for your credit score to increase, national rates to change, and your financial situation to improve. Once you have a better idea of whether this is right for you, you can begin the process of shopping around with different lenders to find the best possible rates.

Should You Refinance Your Auto Loan? Let ALEC Help!

If you're wondering whether you should refinance your auto loan, ALEC is here to help. The professionals at ALEC will work with you to determine if refinancing makes sense for your situation at this particular time. After all, as a credit union, we work for you. Get started by learning more about how to get the lowest rate.

* APR = Annual Percentage Rate. This offer applies only to new loans originated at ALEC. It is not available for refinances of existing ALEC auto loans. All loans subject to credit approval.