Consumers Looking to Refinance Auto Loans Amid Affordability Challenges
As household affordability issues grow more pressing, some consumers are exploring refinancing their auto loans to reduce their monthly payments.
Stephanie Roberts, who oversees auto products at PenFed Credit Union, shared insights on this trend with FOX Business. She noted that easier access to credit terms is helping consumers understand their available interest rates when thinking about refinancing.
“From a credit education standpoint, I think consumers are more informed about their credit health than ever before, which is why they’re considering refinancing,” Roberts remarked. She pointed out that many banks and personal finance apps now provide users with access to their credit scores.
“Numerous financial institutions, including PenFed, enable consumers to check interest rates with a soft inquiry. This won’t impact your credit score or require any commitment. I believe that’s driving more people to realize refinancing could be a good option for them, which they might not have considered before.”
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Roberts emphasized that PenFed is actively reaching out to consumers who might be paying a higher interest rate and want to explore better options during pre-approval. “As a credit union, we’re genuinely concerned about our members’ financial well-being, and we want them to save wherever possible,” she explained.
“It might not seem significant initially, but over the duration of the loan, it truly accumulates,” she added, highlighting that inflation is stretching household budgets for essentials like food and gas. “That extra $100 can be very helpful when you think about monthly expenses.”
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Evaluating the car’s value and equity is crucial for owners contemplating refinancing, as Roberts noted. “Cars are lasting longer than ever. The average lifespan is now around 13 years, thanks to advancements in technology and engineering,” she said.
This emphasis on affordability means that buyers are holding onto their vehicles longer, making refinancing an attractive option.
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Roberts provided some advice for those thinking about refinancing their auto loans. The first step involves assessing the car’s worth using various free valuation tools, which is essential for determining whether refinancing is feasible. “If you owe more than the car’s value, it complicates things,” she noted.
Next, potential refinancers should explore pre-approval options to see if interest rates are lower than their current ones. This allows them to gauge whether refinancing is a smart move given their vehicle’s equity. Additionally, consumers should consider the implications of extending the loan term during refinancing, as it could lead to more savings on payments.
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Some lenders, including PenFed, also provide cash-out refinance options, which may take the form of a title loan on a paid-off vehicle. This could be appealing for those considering personal loans or credit cards instead of liquidating equity in their cars, she suggested.
