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When Should You Refinance Your Car Loan?

June 4, 2022

For most people, having a car isn’t optional. We need a way to get to work, to take the kids to soccer practice and dance lessons, and to go to the store to buy the things we need.

At SeaWest, we want to help you save as much money as possible on your car loan. A great way to do that is to refinance an existing loan into a new loan with a low interest rate, like the one offered by SeaWest.

Here are some reasons to consider refinancing your existing loan. This can help you to decide whether refinancing is a good choice for your financial situation.

A happy family takes a road trip to the beach after learning when to refinance their car loan.

How Does Car Loan Refinancing Work?

Refinancing a car loan means obtaining a new loan to replace your old loan. The process is simple, and many lenders—including SeaWest—give you the option of applying online. 

Here are the steps to refinance your car loan.

1. Check Your Credit

You will want to make sure that your credit score is in good shape before you apply for a new loan. You can obtain free copies of your credit reports annually from each of the three credit reporting bureaus—Experian, Equifax, and TransUnion.

2. Gather Your Documents

Your finances will need to be evaluated when you apply for a car loan. Documents you will need include:

  • Identification
  • Proof of insurance
  • Vehicle information
  • Proof of employment and income
  • Payoff letter from your current lender 

3. Apply for a New Loan

Remember that, as a credit union, SeaWest puts you and the work you do first. This includes having lower rates and an easy application process. You can apply in person or through our website.

4. Pay Off Your Existing Loan

If your loan application is approved, SeaWest will either issue a check to you for the payoff amount or send the check directly to your existing lender. After you have repaid your existing loan, you can then repay the balance with your new loan and enjoy a better interest rate or longer repayment terms.

When Should You Refinance a Car Loan?

Everyone’s financial situation is unique, and there needs to be a clear financial benefit to refinancing for it to make sense. The following are several reasons to consider refinancing.

Interest Rates Have Decreased

Interest is the fee you pay your lender for the money you borrow. The lower the rate, the more you will save. If rates have decreased since you obtained your car loan, you may be able to save money by refinancing. 

Your Credit Score Has Improved

Your credit score is an important factor that lenders consider when evaluating you for a loan. A high credit score is often a good indicator that a borrower will be low risk. Because of this, car loan applicants who have high credit scores usually qualify for the best possible interest rates.

If your credit score and history have improved since you obtained your car loan, you may be able to obtain a better interest rate by refinancing. If you still have several years of payments to make on your car loan, the savings could be substantial.

To Lower Your Monthly Payments

If money is tight and you are having trouble making your monthly car payments, you may be able to refinance with a new loan that has longer repayments terms. This will allow you to lower your monthly payments.  

To Remove a Cosigner from the Loan

People’s circumstances change, and if you used a cosigner to obtain your car loan, that person may no longer want to be part of the arrangement. Refinancing with a new loan in your name allows you to pay off the original loan and release the cosigner from any financial obligations on the loan.

You Financed Your Current Loan through a Dealership

The main drawback of going with dealer financing is that they usually don’t offer the best deals. Dealers usually expect to get paid for arranging financing for you. They may charge a fee for the service, or they may mark up the interest rate and take the extra as their cut of the deal. SeaWest always puts you first. 

When Should You Keep Your Existing Car Loan?

It’s important to point out that there is a particular circumstance where you may not benefit from refinancing. It’s when there is a prepayment penalty on your current loan.

Most people refinance their car loans either to save money on interest or lower their monthly payments. If your current car loan has a prepayment penalty, you may end up spending more money to pay the penalty than you would save by refinancing.

Refinance a Car Loan with SeaWest

You should consider refinancing when it makes sense for your unique financial situation. With a car loan from SeaWest, for example, the low rates could result in significant savings.

Car loans from SeaWest are available with APRs as low as 1.96%.* Loans can be obtained quickly, and no down payment is required. The application process is also simple so you can quickly replace your car loan with a new one and start enjoying the savings as soon as possible.

You and your family work hard for our country, and SeaWest works hard for you. Check out the following link to learn more about auto loan refinancing. It could be the solution you’ve been looking for to help you save money on your car payments.


*Rates are subject to change without notice.

APR = Annual Percentage Rate. Your actual APR will be determined at the time of disbursement and will be based on your application including loan amount and term, and credit information. Rates quoted above are for the lowest possible rate available, which assumes excellent borrower credit history and the shortest term available for that loan program, i.e. the “Best Rate” for Pre-Owned Auto is currently 2.36% for a 36-month term. Rates vary with term.

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