Sometimes you might find yourself stuck in a financial pickle. You have an SUV you love but the monthly payments are gouging your bank account. There are many reasons why this can happen. Your credit score might have taken a hit before you applied for financing due to a loss of income, unexpected medical expenses or other surprises life can throw your way. Fast forward a year or two later, and you have a good credit score but are paying on a loan with a high-interest rate.
Luckily, there are ways to make your payments more manageable. By refinancing your SUV, you can lower your interest rates, resulting in less expensive monthly payments. Along with lower payments, you reduce the amount of money you pay in total loan costs--this is the amount of the vehicle plus the interest charged for every payment made during the loan. Below are some tips to assist you when you are ready to refinance your SUV.
Check Your Credit Reports
First, you should see if you would be a good candidate for vehicle refinancing. If you have been making payments on time and keep balances low relative to the spending limit on credit cards, your score should improve. You also want to examine your credit report for inaccuracies. Considering the FTC found in a 2012 study that one in five people had credit reports with errors, it’s vital you check each of your reports to ensure they are accurate. You can access your reports for free at annualcreditreport.com. If you do notice any errors, follow the bureau’s procedures for filing disputes.
Your SUV's Condition Matters
After examining your credit reports, you’ll want to assess if your SUV is a good candidate for refinancing. Some lenders such as CarFinance.com places restrictions on which vehicles they will finance. Under their qualifications, your SUV has to be less than eight years old and have fewer than $100,000 miles on it. If you bought a newer SUV recently then this shouldn’t be a problem. However, if you financed a pre-owned model that had a good chunk of miles on it, this is an important factor to consider.
Ask Your Current Lender
The best place to start when asking for a lower interest rate is your current lender. After all, they want to continue to build that relationship with you because the longer they have your loan the more money they make off it. If you have made all your payments on time, contact them and ask if you qualify for a better interest rate. Often, you’ll need to request a supervisor to assist you with this. On some occasions, this might include a loan modification, where they will lower your monthly payments by lengthening the loan term, which is only a good option if you cannot afford your current payment. Meanwhile, if they are unwilling to comply, then you can move on to find a lender who will work with you.
Go With Who You Know
When searching for a new lender, consider the banks or credit unions who have your money. If you have been a customer with a local bank for years and they haven’t had any problems with your accounts--late payments, overdrawn checking, etc.--they might be willing to work with you. This is a simple solution because if you refinance through them you have all your accounts at one financial institution.
Compare Multiple Lenders
NerdWallet recommends you check with at least two lenders to see which interest rates you qualify for. This a smart suggestion because it lets you know where you stand with other lenders, and if the savings from the new interest rate will be worth refinancing. Along with this, it gives you an idea of where you can save the most money. Applying for refinancing is easy to do. You can use a service like LendingTree who partners with many loan providers. After completing the short application process, you can receive multiple offers within minutes, allowing you to compare different loans in an expedited manner.
Take Advantage of Lender Discounts
If you find a new lender to refinance your SUV’s loan, ask if they have any discounts. To demonstrate, it isn’t uncommon for lenders to give you a discount on your interest rate if you sign up for auto pay. Not only will you pay less for your loan, you also have the convenience of having payments deducted from your bank account each month, eliminating the worry of forgetting a payment.
If you are able to secure a lower interest rate, consider maximizing the savings. One way you can do this is to select a shorter loan term. Keep in mind the shorter your loan term is the higher the monthly payment will be, so it’s important to find a balance. If you can afford it, select a shorter repayment term. Conversely, if you lack confidence you can make the higher monthly payment, opt for the longer term. You can still pay the loan off early by making extra payments to the loan’s principal during months where you have a comfortable cash flow.
If you don’t want to go through the process of refinancing but want out of your current loan or lease, here are some options you can consider:
- You could sell your SUV back to the dealership. In this case, you’ll need to have cash on hand to offset any difference in what the dealer pays for the SUV relative to the loan’s payoff balance. If you do have the cash on hand, this is a great way to get out.
- If you have a lease you can no longer afford, consider finding someone to take it over. There are websites like swapalease.com who partners people looking for SUV leases with those looking to get out of their lease. Before posting on the website, check with your lender to see if they will allow it.
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