By Brad Swain
New Year’s is a time for big changes, getting back on track – and yet another opportunity to maximize that gym membership. No matter what your well-intentioned New Year’s resolutions may be, hard economic times can bring big financial changes.
Thankfully, hope abounds in 2012. One of the most overlooked areas of personal finance you should reexamine this year is your auto loan. In fact, refinancing your auto loan could be a good decision you make in 2012.
Why refinance my auto loan?
Thanks to current FED polices, interest rates on auto loans are the low at this timema. According to bankrate.com, average rates for used car loans have dropped from 7% in 2008 to 5.48% in 2011. That’s a savings of about $335 on a $10,000, five-year auto loan. So simply refinancing your auto loan to average rates would be like making a payment for free!
Refinancing can also improve your credit score. According to Mint.com, a credit score improvement of just 50 points can be all you need to get a better rate on your current auto loan. Edmunds.com has loan calculators that can quickly and easily show you how just a few points can significantly reduce your monthly payments.
With the money you save, you might consider shortening the length of your loan. While this may slightly increase your monthly payment, you’ll pay your loan off earlier and realize substantial long-term interest savings.
What is the best way to refinance?
Auto refinancing is much simpler than refinancing a home loan. With auto loans, there’s more emphasis on the customer’s credit history than the actual loan amount, so the process is much less time consuming – and more cost-effective – than refinancing a mortgage.
It’s also important to note that auto dealers typically charge much higher interest rates than banks and credit unions. If you have other loans with a bank or credit union, they’re motivated to help you keep your vehicle, since you likely drive to work – where the money you earn empowers you to pay repay your debts.
Get started!
Research multiple banks, dealerships, and credit unions to find the best rates. Unlike other resolutions you may make this year, once you start saving money, this is one you’re likely to keep.
