Bills are a lot like bad weather. They’re going to come anyway, so you might as well not try to fix them, right? For some bills, that’s the case. For others, though, you can make a big difference in your monthly budget without much work. One of the bills you can change is your car payment. Auto loan refinancing can lead to a lower monthly payment, a shorter term, or both! It depends on a wide range of factors, including the value of your vehicle, how much you owe on your current loan, and your credit.

If any of these factors have changed since you bought your car, check out your auto loan refinancing options. Let’s look at some common life changes and when it might be a good time to refinance.

1.) Your credit improves

One of the biggest factors in determining your auto loan rate is your credit score. When you apply for an auto loan, a credit report is pulled. That number helps define your interest rate. Also, whether or not you’ll have to pay a premium for insurance and what other fees your lender might charge (FYI, Money FCU does NOT charge extra for poor credit).

It can take as little as nine months of on-time payments to boost your credit score. In turn, that could result in a cheaper loan if you refinance.

If you didn’t have much credit when you purchased your vehicle, refinancing can do you a world of good. Interest rates as high as 18% are common for borrowers who have little to no credit history. Having even a few months of solid payments on your side can cut that rate in half or more.

2.) You didn’t shop around before you borrowed

Many people feel pressured throughout the car-buying process. They pick a car they like, then get the price. Next, they’re told what the monthly payment will be. It seems like you have no choice in who gets your auto loan.

Dealers tend to have a smaller pool of lenders to work with. They have a few banks and credit unions that pay them to steer customers their way. Those lenders know they have limited exposure to competition, so they can charge slightly higher fees and interest rates. By doing your own comparison shopping, you can save quite a bit on both the loan and any extra insurance or warranty. Dealer rates tend to be 1 to 1.5% higher than those offered at smaller lenders, like credit unions.

If you’ve never shopped around for a car loan, it’s definitely worth doing. By getting multiple offers, you can ensure you’re getting the best price available for your loan. Try to do your shopping inside a 15-day period. Otherwise, the multiple checks on your credit could negatively impact your credit score.

3.) 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 security. Or, you may have paid off some credit cards or other debt. All of 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. However, you can save yourself money in the long run by getting a shorter loan term. If you can afford to pay more per month now, you can pay off the balance on your car faster. Shorter term loans also usually have lower interest rates. That’s because the lender assumes less risk in making the loan. Once the car is paid off, you’ll have all that money to put into your savings.

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.

If you have questions about auto loan refinancing, it’s always a good idea to talk to an expert. We have free financial coaches ready to help. You can also explore our auto loan options to see if our rates are lower than your current loan.