How do you know what time is the right time for an auto refinance? Refinancing can lead to a lower monthly payment, a shorter term, or both! On the other hand, it’s a serious decision to make, and it may not always be the best decision for your financial future.

When deciding on whether to refinance, it’s a good idea to consider a wide range of factors, including the value of your vehicle, how much you owe on your current loan, and your credit standing. If any of these factors have changed since you bought your car, you owe it to yourself to check out your refinancing options. Let’s look at a few signs that may indicate refinancing could be the right option for you:

Your credit has improved
One of the biggest factors in determining your auto loan status is your credit score. When your lender is building a loan package, a credit report is pulled as a central part of that process. Your credit score helps define your interest rate, whether you’ll have to pay a premium for insurance, and what other fees your lender might charge.

It’s worth keeping track of your credit during the initial loan process, allowing you to reference it in the future to determine whether your credit score has, in fact, improved. Consider using something like Savvy Money, a free credit monitoring and analysis tool available to all Ascend members through our digital banking platform

If you didn’t have much experience with credit when you purchased your vehicle, refinancing can do you a world of good. Borrowers who have little to no credit history often have higher interest rates compared to a borrower with a stronger credit history and score. Having even a few months of solid payment history on your side can contribute to a significantly lower rate.

You didn’t shop around before you borrowed
Many people feel railroaded throughout the car-buying process. They pick a car they like, then they are told what the price is and what the monthly payment is. If you didn’t know better, it would almost seem like the choice of lenders for your car loan is predetermined.

Dealer and bank rates tend to be higher than those offered at smaller lenders, like credit unions. Dealers tend to have a smaller range of lenders with whom they work exclusively. Those lenders know they have limited exposure to competition, so they can charge higher fees and interest rates.

Doing your own comparison shopping may help you save quite a bit on both the loan and any insurance or warranties you may have purchased. By getting pre-approved for your loan, you can ensure you’re getting the best price available. Try to do your shopping inside a 15-day period. Otherwise, the multiple checks on your credit could negatively impact your credit score.

You need to change your monthly payment
You may be in a much better financial situation now than when you bought your car. You may have a better job or more financial security. You may have paid off your credit card or other debt. All these things free up how much you can pay per month.

Most people don’t go into the refinancing process looking to increase their monthly payment, but you can save yourself money in the long term by committing to a faster repayment plan. If you can afford to pay more per month now, you can pay off the balance on your car faster. Shorter-term loans usually also have lower interest rates, since the lender assumes less risk in making the loan. Once the car is paid off, you’ll have all that money to devote to other saving or spending priorities.

On the other hand, if money is tight, it might be a good idea to refinance into a longer term. While you might end up paying more in interest, you can reduce your monthly payment and save the money you need right now.

With this in mind, you should have a better idea on whether refinancing your auto loan is the right decision for you. If you’re looking to refinance, be sure to check out our auto loan rates. If you’d like to refinance with Ascend today, be sure to either give us a call at 800-342-3086, visit one of our Middle Tennessee branch locations, or apply online.

Maybe you want to refinance, but your credit score hasn’t improved since you first purchased your loan? Be sure to check out our free financial education course on how to improve your credit for more in-depth tips.