You’ve probably heard of “buyer’s remorse”—that sense of regret people experience after making a big purchase like a car.
What you don’t hear so much about is borrower’s remorse—the dissatisfaction car buyers sometimes feel when they realize the financing they got through the dealer is costing them more than they thought.
Even the toughest hagglers can miss things when they hit the dealership’s business office and begin negotiating loan terms. It’s understandable: by then, you’ve gotten your price and you’re this close to driving away in the car you’ve been lusting after. The finance guy even got you the monthly payments you said you wanted, so why argue?
You never did. You just signed the paperwork and put yourself into cruise control—automatically making those payments every month.
But that doesn’t mean you can’t pump the brakes, pull over, and try again. Refinancing a car loan certainly isn’t for everyone, but could be a potential option. If you’re wondering whether refinancing your car loan is a good financial fit for you, read on.
When Refinancing a Car Loan Might Make Sense
You Think You Can Do Better than that “Dealer-Sourced” Loan
When you finance your car through a dealer, it can feel as though you’re going through some mysterious selection process.
The business office forwards your information to its chosen lenders, then collects bids that outline the terms they’re willing to offer, including the interest rate. Those offers are presented to you and you make a choice.
Perhaps your car loan was offered to you at a time when your finances weren’t as solid as they are now. If that’s the case, and your financial position has improved since you took out a car loan, you may be able to qualify for a personal loan at a better interest rate than your original auto loan. With SoFi’s Personal Loan Calculator, you can compare what you’re currently paying to the estimated payments you might have with a new SoFi loan.
Your Credit Score has Improved
Maybe you’ve gotten a better job and/or paid off some other debts, and you think your credit and overall financial fitness is good enough now to potentially merit a better interest rate. You could be right: If you have a record of making on-time payments on your car loan and other bills, a lender may consider you less of a risk than when you originally financed your car.
You Want to Consolidate a Few Debts into One Manageable Payment
If you have a few credit cards and some remaining payments on a car loan, you may wonder if there’s a way to roll them into one convenient payment. An unsecured personal loan may provide that kind of flexibility.
With an unsecured personal loan, you can apply for the amount you need to pay off your car loan and credit card debt. If you’re approved, you’d be able to pay off those debts, and then you’ll have just one payment on your personal loan every month.
If you’re considering car refinancing, you may find that lenders have minimum loan amounts—for example, SoFi’s minimum personal loan amount is $5,000 (and more in some states due to legal requirements).
The length of your current loan is an important consideration, too—but the length of a new loan could also be a deciding factor.
If you can’t pay off the refinanced loan in the same or less time than the one you have scheduled, it may not make sense to apply for a new loan. Yes, potentially lower payments could give you some financial breathing room, but if your goal is to get out of debt, you may want to try to stick to the shortest loan term you can manage.
Potential Refinancing Options
SoFi offers competitive rates with no origination, prepayment, or even late fees. And a SoFi personal loan includes unemployment protection for those who qualify, so if you lose your job through no fault of your own, you may be able to temporarily pause your payments.
Do your research and run the numbers. Life doesn’t always offer do-overs, but refinancing a car loan may make sense in certain situations.
The information and analysis provided through hyperlinks to third party websites, while believed to be accurate, cannot be guaranteed by SoFi. Links are provided for informational purposes and should not be viewed as an endorsement.
Disclaimer: Many factors affect your credit scores and the interest rates you may receive. SoFi is not a Credit Repair Organization as defined under federal or state law, including the Credit Repair Organizations Act. SoFi does not provide “credit repair” services or advice or assistance regarding “rebuilding” or “improving” your credit record, credit history, or credit rating. For details, see the
FTC’s website on credit.