Re-Evaluating Your Current Auto Loan
If you have purchased a car in the last few years, you may be feeling it in your wallet every month when you make your car payment. The auto chip shortages in 2022-2023 caused the prices of both new and used cars to spike and combined with the high interest rates that we’re seeing in Ohio, auto buyers are paying significantly more for their car purchases than they were a few years ago.
According to Edmunds.com, the average Annual Percentage Rate (APR) on a new car in Ohio is just under 7%, and used cars average around 12.5%. If the interest rate of your existing auto loan is similar, and you have more than $5,000 left to pay, it may be worth refinancing your loan to a lower interest rate.
4 Benefits of Refinancing
Refinancing doesn’t always mean a lower interest rate. You can also refinance and cash in on the equity of your vehicle to help consolidate and pay off higher rate debts.
Lower your monthly payment
A lower interest rate lowers the amount of interest that is factored in your monthly payment. By refinancing to a lower interest rate, you can lower your overall monthly payment resulting in a more affordable car payment. If your credit score has improved since your car purchase, you may be able to lock in a lower interest rate now.
Reduce the interest on your loan
With any installment loan, the interest is higher at the beginning of the loan, which means the amount of your monthly payment that goes toward the principle is initially lower. Refinancing at a lower rate reduces the amount of interest paid monthly and over the life of the loan.
Change your term
You may find refinancing helpful to change your term to further spread out your payments, resulting in a lower monthly payment, or you could shorten your term and speed up your payment, depending on your needs. For example, if you have a 72-month loan currently, a lower rate may give you a more affordable payment that makes a 60 or 48-month loan feasible.
Cash out equity to help with current expenses
If you are in a financial bind, refinancing your auto loan gives you the option to cash out the equity in your vehicle. This can help you consolidate other high-rate debts and pay off your bills faster. The equity is simply calculated by subtracting the outstanding principle from the current market value of your vehicle.
KEMBA Offers Competitive Auto Refinance Rates
If you are locked into an auto loan with a high interest rate and a high monthly payment, or simply need to evaluate your loan based on current financial circumstances, KEMBA can help. Depending on your loan balance, you might be better off lowering your interest rate, cashing out your equity, or shortening your loan terms with an auto loan refinance. Our local team of financial experts can help analyze which option is best for you. With our 12 area branches, you can visit your local credit union branch or contact our dedicated member service team at 614.235.2395 and select Option 4 to learn more about an auto loan refinance.