Yahoo Autos Can You Refinance a Car Loan with a Credit Union? Learn when you should (and shouldn't) consider it
Can you refinance a car loan with a credit union? You can refinance an auto loan with a credit union, and doing so has many benefits. Choosing the right lender can help you secure the best rates, which results in lower monthly payments. Learn everything you need to know about refinancing a car loan with a credit union, including benefits and steps to begin the application process.
Compare Car Loans Below
What Does It Mean to Refinance a Car Loan?
Refinancing means applying for a new auto loan to replace your existing one. If approved, your new loan replaces your existing loan, which can lead to lower monthly payments if you secure a better interest rate. You have a few options available when choosing to refinance, with a credit union being just one of them.
Reasons to Refinance Your Auto Loan
The most common reason to refinance an auto loan is to qualify for a lower rate. A few reasons to consider refinancing your current loan include:
Cash-out equity: A cash-out equity loan allows you to take out a new loan for the full value of your vehicle. A cash-out refinance restarts your loan, and the lender issues you a check for any equity in your car. However, you'll want to remember that a cash-out refinance loan extends your loan into a longer term, which may leave you owing more than your vehicle's worth.
Remove a cosigner: A refinance loan allows you to remove a cosigner from your auto loan. You might remove a cosigner following a divorce or if the other person's credit score decreases.
Reduce your monthly payments: Qualifying for a lower interest rate can lead to a lower monthly payment. Whether you're struggling to make monthly payments or want to save more each month, refinancing your auto loan is one of the best strategies.
Pay less on the life of the loan: Low rates mean you'll pay less for the vehicle over the loan term. With a new interest rate, you can save significant money on your vehicle's financing.
Defer payments: Many lenders offer a grace period when refinancing, which can defer your payments by a few months, helping you catch up if you're behind. Deferring payments, however, may extend the time until you pay off your vehicle.
Should You Refinance with a Credit Union?
Whether or not you refinance your auto loan with a credit union depends on many factors, including if you'll qualify. Refinancing loan eligibility depends on elements like credit score, loan amount, and payment history.
It may be a good idea to refinance your auto loan if your credit score has improved, interest rates are lower, or you want to reduce your monthly payments.
Of course, comparing annual percentage rates and loan terms with other lending options, including dealerships, banks, and other financial institutions, is essential. A credit union might offer a lower interest rate, but this is not guaranteed.
A few great reasons to refinance with a credit union include:
Personalized service: Credit unions are known for personalized, helpful customer service. When you choose a credit union, you may work with the same bank representative or employee for all your loans.
Nonprofit business model: Credit unions function as a nonprofit, which means they may be more likely to offer you competitive interest rates and loan terms.
Lower fees: Credit unions are also less likely to charge expensive fees. Application and financing fees from big banks can add up and result in a higher monthly payment.
Ease of application: You can apply for refinancing through a credit union online or by visiting a bank branch. The great thing about credit unions is that many share memberships, meaning you can visit a different credit union to apply for a refinancing loan than the one where you originally became a member.
Seamless banking: Most credit unions today have mobile apps and online banking. Using these tools, you can easily transfer funds between your checking account and auto loan for timely, convenient payments.
Things to Know About Refinancing a Car Loan with a Credit Union
Here are a few essential things to know about refinancing a car loan with a credit union:
Most Credit Unions Require That You Be a Member
Most credit unions require that you're a member to apply for financing through them. Some credit unions may allow you to join while applying, but others have membership eligibility requirements. Becoming a credit union member typically requires opening a checking and savings account. You can easily become a member by visiting your nearest branch.
Refinancing Affects Your Credit
Refinancing is similar to applying for an auto loan, which means the lender will pull a credit check. The interest rate you receive from the credit union will depend on many components, including credit score, debt-to-income ratio, and your history with the credit union.
Refinancing your auto loan can also indirectly affect your credit score by closing an older account and opening a new one. As long as you continue making timely payments, though, refinancing shouldn't have too much of a negative impact. Additionally, if you compare refinancing loans within the same 14-45 days, multiple credit inquiries shouldn't change your score.
Not Everyone Will Qualify
Not everyone will qualify for a refinance loan. Like applying for any auto loan, the lender will weigh elements including your credit history and income to determine your ability to make payments. When you refinance through a credit union, you must qualify for the loan and membership with the lender.
Many credit unions also have minimum loan amount requirements, so they may not refinance your loan if you only have a year or two left. However, it's usually not a good idea to refinance an auto loan if it's close to being paid off. You pay most of the interest at the beginning of the loan, meaning you'll typically pay more for the vehicle if you refinance near the end of the loan term.
