Your auto loan is probably one of your biggest fixed monthly costs. According to the credit reporting agency Experian, the average monthly auto loan payment for a new vehicle was $568 last year. That’s a hefty sum to fit into a tight monthly budget, especially if you’re already struggling financially. Experian reported just this month that U.S. auto debt has grown to record highs. That’s no surprise when you look at the rising average payment. You may be wondering if there is any way you can lower your existing payment to enjoy some savings. Auto loan refinancing may be the answer to cutting your payment to a more manageable amount.

Is auto loan refinancing right for you?

If current auto loan rates are lower than your existing rate, or your credit score has improved dramatically, then refinancing your auto loan may be able to help lower your monthly payment. You can begin by searching to see if car loan rates have dropped since your original loan or if a lender is offering a special deal. Securing a lower interest rate should be your number one priority if you are looking to refinance to save money. For instance, Spirit Financial Credit Union is currently offering to beat your current auto loan rate by up to 1%*. That’s not all, you’ll also realize the savings of no payment for 90 days on top of the rate reduction. Tap here to compare your current rate with Spirit Financials auto loan rates. That’s just the type of deal you should be looking for.

Just keep in mind that refinancing your auto loan means you are taking out a new loan and using that money to pay off the existing loan. This may mean new fees, so when searching the rates, check on fees as well. You’ll also want to be sure your credit score is in good shape before refinancing. If it has improved, that’s a plus. Finally, we suggest keeping your term the same. Refinancing and lengthening your term may actually cause you to pay more over the long haul. Below are some tips to determine if refinancing your auto loan is right for you.

Checklist of what to consider when refinancing an auto loan

• Your credit score is stable or has improved. If not, you can end up with a higher rate.

• You are current on your auto loan payments.

• Your vehicle has equity. If you are upside down on your auto loan or owe more than the car is worth, it may not be the right time to refinance. Check to see how much you owe on your existing loan, then check your vehicle’s value on Kelley Blue Book or Edmunds.

• Is there a prepayment penalty on your existing auto loan? If so, be sure it doesn’t outweigh the savings of refinancing. A prepayment penalty is a fee charged by some lenders if you pay off a loan early.

• What are the fees involved in refinancing? As we mentioned above, there may be fees. It’s important to know upfront the total cost of refinancing for an accurate comparison of lenders.

• What is the age of your vehicle? Many lenders have restrictions regarding refinancing a vehicle over a certain age.  

Steps for refinancing an auto loan

Once you’ve determined that refinancing is the right move for you to save on your monthly payments, it’s time to start the process. If you’ve researched rates and terms, you’ve probably determined the best lender for your auto loan refinancing needs. If you haven’t, do this now before going any further. Include Spirit Financial Credit Union or your local credit union when comparing. Credit unions are not-for-profit financial institutions that focus on providing the lowest rates and best terms to their members.

1.     Gather the information requested by your lender. This will include personal and financial information, such as proof of income and employment, as well as expenses. It will also include information on your existing auto loan, current balance, and lender contact information. They will also request proof of car insurance.

2.     Gather your vehicle information. Your new lender will need all of your vehicle information. This includes the VIN (vehicle identification number), as well as the make, model, year of the vehicle, and the current mileage.

3.     Apply for your auto loan.

Refinancing can be a great way to find an auto loan payment that fits your budget. If you’re not satisfied with your current auto loan rate, there’s no better time to consider refinancing. Shop around for the best deal. View Spirit Financial auto loan rates and learn more about refinancing today.

* Floor rate is 2.74% APR - Annual Percentage Rate. Minimum auto loan is $5,000. Current Spirit Financial Credit Union auto loans are not eligible. All loans subject to loan to value and other qualifications for final underwriting approval. If our regular rate provides you with more savings than this offer, you will receive the lower of the two rates. Proof of your current rate (APR) is required. Auto financing up to 120% of value and terms up to 72 months. For 2014 and newer vehicles. All loans based upon credit qualifications. Not all members will be eligible.