You should consider refinancing your truck when interest rates are favorable, when your current loan isn’t too new or too old, or when your personal finance situation has changed.
Read on for the long answer.
Here’s everything you need to know to decide if now is the right time to refinance your truck.
In this guide, we’ll cover:
What it means to refinance a loan
Why refinance your truck loan
The major factors you need to consider when deciding when to refinance a truck
Refinancing means paying off your existing loan with a new loan – ideally one with better terms.
To pay less money overall by getting a lower interest rate or shortening the term of the loan
To pay less monthly by extending their loan or lowering their rate
To add or drop a co-borrower
Thanks to dealership markups, most people are overpaying every month for their truck loan. Refinancing is a straightforward way to fix that.
With the cost of living going up and up, whether you're trying to make ends meet, looking to save for a big purchase, or simply looking for more disposable income, many of us are looking for ways to save a few dollars.
Refinancing your truck may be a quick and easy way to reduce your monthly vehicle payments and give your wallet some much needed breathing room.
If you have more cash in hand, shortening the term of your loan can help you pay less overall, even at the same interest rate. Or, you might want to pay off your loan before a specific date (say, for example, you were retiring and didn’t want to worry about having a vehicle loan after retirement).
Lengthening the life of the loan may mean paying more overall (unless you also get a lower interest rate), but can mean paying less monthly, freeing up more money each month in the here and now.
Your personal finances, including your credit score, income, and future cash flow
Your current loan’s terms, including prepayment penalties and time remaining
Current interest rates
Let’s take a closer look at each of these factors.
This includes:
your credit score
your income
your cash flow
Trying to determine when is a good time to refinance a car loan or truck loan is going to vary from individual to individual. Your personal finances will be a huge factor as to when you should consider refinancing.
You might be wondering, “what credit score do I need to refinance my car or truck?”
The truth is there is no one magic number that will make refinancing make sense. Instead, look at how your credit score has changed since you last financed your truck.
If your credit score has increased, even only slightly, you may qualify for a lower interest rate. This leads to more savings every month and more money in your pocket.
If your credit score has gone down, this might not be the best time to consider a vehicle refinance.
A good credit score is one of the most important factors in securing a good interest rate, so keep a close eye on your score to determine the best time to refinance.
If your income has decreased recently, refinancing can help reduce your monthly bills and help bridge the gap between earnings and expenses.
If your income has increased, you may want to pay more monthly on a shorter loan to pay less interest.
As well as changes to your income, you might have changes to your expenses.
For example:
If your family is expanding
If someone you love is sick
If you want to remodel your bathroom
If you want to pay off credit card debt
If you’re saving up for a special occasion
If, for any reason, you’re spending or saving more and could use some extra cash, refinancing your truck could be the answer to your cash flow challenges.
You could pay less monthly with a refinance.
You may also be eligible to refinance and borrow additional money based on your truck’s value. It is important to be careful here, however; a truck is a constantly depreciating asset, so you do not want to risk owing more money on your truck than it is worth.
In addition to your personal finances, it is important to look at the current terms of your auto loan to determine whether or not it is the right time to refinance your vehicle.
Consider:
The time remaining on your loan
Any prepayment penalties or fees built into your current loan
The amount of time you have left in your repayment period will affect whether or not refinancing is worthwhile. In addition, some lenders charge fees should you choose to pay back your loan early. It is important to check these terms and weigh your options.
Here’s a more in-depth explanation.
This is the time left on your current loan’s pay period.
If refinancing to a lower interest rate results in a similar or shorter payment period with a lower rate, you will certainly reduce your payments and save money overall.
But if refinancing your truck lengthens your payment period, it may lead to lower monthly payments, but the additional payment period means you may be paying more money overall.
This decrease in monthly payments may still make sense though, depending on your financial situation. It is important to look at all of your options and do the math to decide whether or not it is a good time to refinance your truck.
On the fence? The experts at Auto Approve can help you compare options from different lenders to make sure you get the best truck refinance for your unique situation.
Some lenders charge a penalty for paying off early, making it more of a burden to refinance.
Prepayment penalties help companies to offset the lost profits that come as a result of paying off loans early.
To find out if your loan has a prepayment penalty, you can:
look through your contract
contact the lender directly to find out
If you find out there is a penalty associated with paying off your loan early, be sure to sit down and do the math. If the penalties of refinancing your truck are outweighed by the savings, it still might make sense to refinance.
While there can be exit and transfer fees associated with refinancing, rest assured that, at Auto Approve, we never markup the price that you pay.
Interest rates tend to fluctuate, and have been up and down over the past several years. The best thing to do is to compare the rate of your current loan with the available rates at the time you’re considering refinancing.
If all other factors are equal, keep an eye on interest rates to try to time your refinance just right. But if your personal situation has changed, unless you got a really low rate on your initial financing, it may be worth checking your options whenever you feel a refinance is right for you.
Getting a free quote from Auto Approve requires no hard credit check and no commitment, so there’s no time like the present to see how much you could save.
Should you refinance your car or truck? Is refinancing a vehicle worth it? As you can see, there are many factors that must be taken into account.
Ultimately, you want to get:
the shortest loan term you can afford AND
the lowest interest rate available to you
to guarantee you are getting the best truck loan possible.
At Auto Approve, we advocate to get you the best rates and best deals from leading lenders. If you're ready to refinance your truck, we can help.