Tips for refinancing your upside down car loan
If you're among the millions of Americans with an upside down car loan, you're not alone. In fact, you're in good company. According to data from Experian, more than 4 million Americans were in this situation as of the end of 2017.
An upside down car loan occurs when you owe more on your loan than your car is currently worth. It can happen for a number of reasons, including an extended loan term, negative equity from a previous loan, or simply because the value of your car has declined faster than you've been able to pay down your loan.
Whatever the reason, being upside down on your loan can be a frustrating and stressful situation. But it doesn't have to be a permanent one. Here are a few tips to help you refinance your upside down car loan.
Check your credit score and report
The first step in refinancing your upside down car loan is to check your credit score and report. This will give you an idea of where you stand in terms of your creditworthiness and whether you may be eligible for a better interest rate.
You can get a free copy of your credit report from each of the three major credit reporting agencies - Experian, Equifax, and TransUnion - once every 12 months. You can also check your credit score for free on a number of websites, including Credit Karma, Credit Sesame, and Quizzle.
Shop around for a new loan
Once you know where you stand in terms of your credit, you can start shopping around for a new loan. There are a number of places you can go for a loan, including your current lender, a credit union, or an online lender.
When you're shopping for a loan, be sure to compare interest rates, loan terms, and fees. You'll also want to consider whether you want a fixed-rate or variable-rate loan. A fixed-rate loan will have the same interest rate for the life of the loan, while a variable-rate loan will have an interest rate that can change over time.
Consider a shorter loan term
One way to reduce the amount of interest you pay on your loan is to choose a shorter loan term. For example, if you have a 60-month loan, you can refinance to a 48-month loan and save on interest.
Of course, choosing a shorter loan term will also mean higher monthly payments. But if you can afford the higher payments, it can be a good way to pay off your loan faster and save on interest.
Make a bigger down payment
Another way to reduce the amount of interest you pay on your loan is to make a bigger down payment. The more money you put down upfront, the less you'll have to finance, and the less interest you'll pay over the life of the loan.
If you don't have the cash to make a bigger down payment, you may be able to get a loan from a family member or friend. Or you could consider selling some of your assets, such as a boat or a second car, to raise the cash you need.
Refinance with your current lender
If you're happy with your current lender, you may be able to get a better interest rate by refinancing with them. Lenders often offer their best rates to existing customers, so it's worth considering if you're eligible.
To refinance with your current lender, you'll need to go through the same process as you would with any other lender. This includes checking your credit score, shopping around for the best rate, and comparing loan terms.
Refinancing your upside down car loan can be a good way to save money on interest and pay off your loan faster. By following these tips, you can get the process started and find the right loan for you.Posted on Mar 16, 2023, in Credit
Any information contained within the contents of this blog are opinions and suggestions of the writers and do not necessarily reflect any policies or positions of the credit union. Any reference made to products or promotions are not guaranteed at any time. This information is not intended to be considered financial advice. It is provided for your education only. Community 1st Credit Union is Federally Insured by the NCUA.