How do you know when to refinance your SUV?
Here’s the short answer.
You should consider refinancing your SUV under any of the following circumstances:
You are eligible for a better deal because you got a bad deal from your dealership
Interest rates have dropped since you got the loan
Your income or credit score has gone up
Your budget has tightened and you need to pay less monthly
You want to add or remove a co-borrower
You should not refinance if:
Your credit score has dropped
You’re about to have your credit checked for something else or recently had a hard credit check
Your loan is less than 6 months or more than 2 years old
Your current loan on your SUV is underwater
Your vehicle is very old or has very high mileage
You’ll owe more in penalties on your current loan than you’ll save with a new loan
Work with a refinancing expert
At Auto Approve, we can help you find the best deal for your unique situation, and getting a free quote requires no commitment or hard credit check, so if you’re considering it, get your free quote and our advisors can help you understand your options.
Here’s everything you need to know about when to refinance an SUV (and when not to).
What is refinancing?
Refinancing is the process of taking out a new loan to pay off the balance of your existing loan, ideally with better terms on the new loan than the original loan.
What are the top reasons to refinance your SUV?
There are a number of good reasons you might want to refinance a vehicle.
1. Lower your monthly payments.
Maybe your financial situation has changed and you need a little more money every month. If you want a little more breathing room for your wallet, vehicle refinancing can help lower your monthly payments, either by lowering your interest rate, extending your payment timeline, or both.
2. Pay less overall.
Maybe you have a bit of extra money and you want to pay off your SUV at a faster rate and be done with the loan entirely. Maybe you’re eligible for a better rate now. Refinancing can lower your interest rate and/or decrease your payment timeline, saving you money.
3. Make a change to the loan.
More mundane but equally valid, sometimes people choose to refinance to add or remove a co-borrower, meet a new timeline, or make other smaller changes to the loan terms.
How to know if the time is right to refinance your SUV
Here are some factors to consider when deciding if now is the best time to refinance a car or SUV:
The current terms of your loan
Your income
Your credit score
Your cash flow
Any upcoming large purchases or credit checks
Interest rates at large
Where you got your loan
When you got your loan
Who else is on your loan (or should be)
Your vehicle’s age and mileage
The loan-to-value on your current SUV loan
Examples of when to refinance your SUV and when not to
There are many things to consider when it comes to refinancing a car. If any of the following apply to you, it might be a good time to refinance your vehicle.
1. You didn’t get the best deal on your SUV in the first place due to your income or credit score
Maybe your credit score had just taken a hit from some inquiries or missed payments. Maybe you had a tough couple months at work and your income wasn’t as high as the bank would have liked. Regardless, the bank didn’t view you as a very desirable candidate, and you were stuck with a rather high interest rate.
Since then, your credit has improved. You have checked your credit reports on the three credit bureaus (which you can do for free once a year), and everything looks better. Your job is steadier, and your paychecks are a bit bigger. You know that if you went for that loan now, you would get a much better rate. While there is no magic credit score to refinance, you know that you are a much more desirable candidate this time around.
If you originally bought your SUV when times were a bit tougher and your situation has since improved, this could be a great time to consider refinancing.
2. You didn’t get the best deal in the first place due to a smooth talking salesman
You went in to browse and get an idea of what kind of SUV you might be interested in, and before you knew it you were signing on the dotted line. Somehow you agreed to a 7% interest rate when other lenders were offering 5%, and you didn’t even see it coming. Car dealerships notoriously offer higher rates to make more money, and it is common to get caught up in the excitement and agree on the spot.
In this case, simply refinancing with an accredited lender can reduce your interest rate, even if your credit score and income have remained the same.
3. Interest rates in general have dropped since you first took out the loan on your vehicle
Big banks tend to adjust interest rates based on how the economy is performing. It’s worth considering the rates available now versus the average rates when you first got your loan.
While your personal finances are most important for determining your loan rate, standard rates fluctuate regularly, and you may be able to get a better deal simply by paying attention to those fluctuations. Timing can make a huge difference when it comes to interest rates and refinancing your vehicle.
4. You want to add or remove a borrower to your policy
Adding or removing a co-borrower to your loan is a very common reason to refinance, whether the reason is personal or financial.
Adding a Borrower
Maybe times are tough right now. Your hours at work got cut and you are struggling to make ends meet. The monthly payments are simply too much to keep up on. Your friend or partner, however, could use a set of wheels, and they have some extra money to help bridge the gap in your payments. Best of all? They have fantastic credit. That's a great reason to consider refinancing your SUV! You can also refinance with a partner who has better credit simply to reduce household bills or help a partner who has worse credit than you by co-signing on their refinanced loan.
Whatever your reason, adding your friend or partner to the loan can secure you a better interest rate and reduce your overall payments, since you will be splitting the monthly cost. The lender will consider your joint income and both of your credit scores when determining an interest rate.
Removing a Borrower
What about removing a co-borrower? Maybe you had a co-borrower on the original loan because your credit wasn’t the best, but you don't really need the help anymore. Or maybe you were in a relationship that has now gone south and you need to separate from that person financially. Either way, refinancing your vehicle is a great way to sever that financial tie.
5. You need the extra breathing room each month
Your finances have changed a bit for whatever reason, and you are having trouble making your monthly payments on everything. You want to take a big trip or are saving up for a big purchase. You simply want more spending money to pamper your family. No matter why you want a little extra wiggle room, refinancing could be the solution.
Refinancing can allow you to lengthen your repayment period, which will lower your car loan payments every month. Keep in mind that this often means you will be paying back more money overall for the duration of the loan, unless you are able to drastically reduce your interest rate as well.
6. It’s been at least six months since you originally took out your SUV loan
You need to wait at least 60 to 90 days to be able to apply for refinancing, as it typically takes this long for the title transfer to complete. But waiting six months will allow your credit score to bounce back from any dips that your credit score may have taken when initially securing your loan. First time borrower? Experts suggest waiting a year to refinance to optimize your refinancing options.
7. You have at least two years remaining on your current SUV loan
Since most of the interest for a loan is paid in the beginning, the more that is paid off on the loan, the less beneficial refinancing can be. Having at least two years remaining on your loan will help ensure that you will benefit from refinancing your vehicle.
When the time is not right to refinance an SUV
There are several reasons that it might not be the best time to refinance your SUV. If any of the following apply to you, consider waiting on refinancing your vehicle.
1. Your credit score has decreased
Your credit score is the single most important factor in determining your interest rate. If your score has not increased since your original loan, you will likely not qualify for refinancing. Credit scores can decrease for a number of reasons, such as:
Late or missed payments.
High credit balances.
One of your credit limits decreased.
A lot of new credit inquiries.
Your credit utilization score has dropped. This ratio is determined by adding up all of your credit card balances and dividing it by your available credit. This number should ideally be 30%
Any of these factors can cause your credit score to drop. Request a copy of your credit report and, if you see any inconsistencies, you can report it to the credit bureaus.
2. You need a high credit score for another reason
When you apply for refinancing, your credit score will take a hit. There is a fourteen day window allowed by the big three credit bureaus that allows for all credit inquiries in that span to count as one credit hit. But if you need your credit to be in good standing for another reason, say a mortgage application, it is best to hold off. These credit inquiries will affect your credit score for a year, so plan accordingly.
3. The fees outweigh the savings
Some lenders build in prepayment penalties to their contracts. To offset the cost of losing your remaining interest, they build in penalty payments. Read your contract closely to see if you will incur any penalties, and call your lender directly if you are still unsure. Sit down and do the math to determine how much you will save by refinancing a vehicle, and see if that outweighs any penalty fees you might incur.
4. You have an old vehicle or a vehicle with high mileage
If your SUV has very high mileage or is an older model, it will be difficult to refinance. It might make more sense to consider trading in or buying a new SUV if this is the case.
5. You owe more on your SUV than it is worth
When you owe more on your SUV than it is worth, it is referred to as being “upside down” or “underwater”. If this is the case, lenders may not see the value in refinancing your SUV loan.
Now you can decide the best time to refinance your SUV
If the time seems right, Auto Approve is standing by to help you apply, compare offers, and determine the best refinancing option for you. Auto Approve never marks up the rate you pay, so you know you're getting the best rate available.
With an A+ rating from the Better Business Bureau and a 96% would-recommend rating from Lending Tree, you can be confident that we will work hard to save you money.