Owning a car is an essential part of getting around in most places throughout the country. However, if the current interest rate on your vehicle loan is super high, it can eat up a sizable portion of your monthly income. Fortunately, there are different methods that you can utilize to help lower the interest rate on your vehicle loan.
Refinance Your Auto Loan
Probably one of the easiest ways to get a lower interest rate on your vehicle loan is to refinance it. According to Lantern by SoFi, “…a lower interest rate means your monthly payments will potentially be more manageable, and you’ll pay less over the life of the loan.” Many people get confused wondering “how long before you can refinance a car?” The truth is that you can refinance a vehicle the next day as long as there is no prepayment penalty on your existing auto loan.
Purchase a New Vehicle
Another great option to lower the interest rate on your auto loan is to trade in your existing vehicle and purchase a new one. You want to make sure that your new vehicle is less than the value of your existing car. This option is a great method to implement whenever you’ve increased your credit score from the last time you purchased the vehicle. A higher credit score will allow you to take advantage of lower interest rates on your new auto loan.
Use a Cosigner
If you’re considering refinancing your existing vehicle loan or are intending on purchasing a new vehicle, you may want to consider using a cosigner. This is a person who has superior credit to you and will sign along with you to guarantee that you’ll make the payments on the vehicle. In the event that you don’t make a payment, they would make it on your behalf. Having a cosigner on your loan is a great way to reduce the interest rate and keep your monthly payments at an affordable range.
Renegotiate Your Current Terms
If your credit score has increased since the time that you took out your original auto loan, you may be able to go back to your lender to have them change your current terms. Some lenders will renegotiate existing terms based on your current credit situation. It’s important to note that lenders are not required to renegotiate terms.
Extend Your Current Loan Term
Most vehicle loans are financed for between three and five years. However, lenders have been offering longer repayment terms to help fit the budget of many individuals. One thing you can do to help reduce your current interest rate is to extend your current loan term. Lenders will typically lower the interest rate in accordance with extending the term of a loan. It’s important to note that because the loan will be out for a longer period of time, you will end up spending more money on interest.
Dealing with a high-interest rate auto loan can be frustrating and constraining for your budget. Fortunately, by implementing some of the strategies above, you can work to reduce your auto loan interest rate so that it better fits into your budget.
