Lower Monthly Payment
One of the most significant benefits of a longer loan term is a lower monthly payment. Since payments are spread out over more months, the monthly payment of a 72-month loan would be significantly less than a 48-month loan. Having to pay less each month can help free up cash flow and give you more flexibility in your monthly budget. However, remember that a longer loan term is a longer commitment, meaning that you’ll be making those lower monthly payments for a longer period of time. You’ll also be paying interest during that time, so finding a low interest rate is ideal.
Looking to Refinance?
When you refinance, you’re paying off your old loan with a new loan with new terms. Think of refinancing this way: you’ve already spent time paying down a portion of your auto loan, so the total amount of the new loan will be lower when you refinance. Second, if you have paid down your loan for several years, a lot of negative equity has already been paid off by your hard work. Extending the term could have less impact on increasing negative equity. Combine all of this with a longer term, and you may be on the road to big savings on your monthly payment. To take full advantage of a refinance, be sure to use a financial institution like Cedar Point Federal Credit Union, which consistently offers some of the lowest rates in the area.
Higher Disposable Income
When you have a lower monthly payment, you can put the savings towards something else. For instance, perhaps you have high-interest debt that you’d prefer to pay off first. Or maybe you could use a little extra money in your wallet for necessities. Whatever the reason, a lower monthly payment can give you more flexibility in your budget and increase your disposable income.
Your Credit Score May Have Improved
Your credit score changes over time depending on your credit decisions. Having a good credit score offers certain advantages, such as access to better loan terms and lower interest rates. If your credit score has recently improved, you could receive a much better rate by refinancing to a longer term. You’ve worked hard to achieve that credit score. Why not take advantage of its perks by refinancing your auto loan?
Remember that borrowing money is an important decision, so weigh your options carefully and look for the best financial institution with which to do business. If you decide that a longer loan term is right for you, consider visiting Cedar Point Federal Credit Union to discuss your options and submit an application. Cedar Point consistently offers competitively low rates.