Feeling Stuck in Your Car Loan? Might Be Time to Shop Around!

Some bills can’t be changed. For other bills, though, a little legwork can make a big difference in your monthly payment. Your car payment is a great example. Refinancing your vehicle loan can lead to a lower monthly payment, a shorter payment term or both! It depends on various factors, including the value of your vehicle, how much you owe and your credit standing.

Read on for three common life changes that might mean it’s a good time to refinance your vehicle.

1. Your credit rating improves

One of the biggest factor determining your auto loan status is your credit score. When your lender builds a loan package, they pull a credit report as a central part of that process. That number can determine your interest rate, whether you’ll pay an insurance premium and what other fees your lender might charge.

Keep a copy of the documents your lender provided regarding your credit score. That can allow you to revisit what it was to see if your credit score has improved. Nine months of steady repayment can boost your credit score, resulting in a less costly loan.

If you didn’t have much credit history when you purchased, refinancing could do you a world of good. Interest rates as high as 18% are common for new borrowers. Just a few months of solid payments may cut that rate in half.

2. You didn’t shop around initially

Many people feel railroaded throughout the car-buying process. They choose a car, and then are told the price, the monthly payment and everything else. It’s almost like the lender for your car loan is predetermined.

Dealers usually have a smaller range of lenders with whom they exclusively work. Those lenders have limited exposure to competition, so they can charge higher fees and rates. Do your own comparison shopping. Dealer rates can 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 worth doing now. Do your shopping inside a 15-day period, though; multiple checks on your credit could negatively impact your credit score.

3. You need to change your monthly payment

Your financial situation may have improved since you bought the car and you can now afford to pay more per month. You’ll save money in the long term by doing just that. Shorter-term loans usually have lower interest rates. Also, you’ll pay off the overall balance on your car faster.

If money is tight, consider refinancing for a longer term. Although you’ll pay more in interest, you’ll reduce your monthly payment and save the money you need now. You may also be able to reduce the monthly payment if your credit score has improved, interest rates have dropped or if you’re getting a better rate from another lender.

Contact Olean Area Federal Credit Union to find out how refinancing can improve your financial life!

Should I Refinance to a 15-year Mortgage

With mortgage rates falling, many homeowners are rushing to refinance their 30-year mortgages into 15-year loans. Borrowers may be wondering if this is a financially sound move to make for their own mortgage.

We’ve researched it and worked out the numbers for you so you can make a responsible, informed choice.

When refinancing can be a good idea

The primary attraction of a shorter mortgage term is paying off your home loan sooner, typically at a lower interest rate. Refinancing to a shorter-term loan makes the most sense when interest rates are falling.

How much money can I save?

Let’s assume you have a fixed 30-year, $300,000 mortgage with an interest rate of 4.5 percent.

If you kept your existing mortgage unchanged for 30 years, you’d be making 360 payments of $1,520.06 a month, not including taxes, insurance and other fees. Over the life of your loan, you will have paid $247,220.13 in interest.

Now let’s explore what these payments would look like if you refinance to a 15-year fixed-rate loan at a 3.5 percent interest rate.

Over 15 years, you would make 180 payments of $2,144.65. Over the life of the loan, you’d be paying $86,036.57 in interest payments, affording you savings of $161,183.56.

Remember: These numbers may or may not translate to your own situation. These savings are calculated over 30 years, but you may be nearing the halfway point of your mortgage. Refinancing at a lower rate may still be a good idea, but your interest savings will be much less than described above. Second, your rate may not be a full point lower after a refinance, as it is in our example. This, too, will bring less savings.

What will a refinance cost?

Expect to pay a minimum of 2.5 percent of your new loan in closing costs and other fees. Before you get started on the refinance process, it’s best to tally up these expenses and see what it would cost you to refinance.

Also, your existing mortgage may have prepayment penalties. Find out about these fees before you set the refinance process in motion.

When refinancing is not a good idea

If you’re convinced that a 15-year refinance is right for you, first consider this crucial factor: Your monthly mortgage payments will increase significantly after a 15-year refinance.

If you’re financially responsible, you won’t consider this move unless you are confident you can afford this increased mortgage payment each month. However, you may not realize that tying up your spare cash in your home’s equity can be risky. It can make more financial sense to build an emergency fund, increase your retirement contributions and pay off high-interest debt before refinancing.

If you’re ready to make the move to a shorter-term loan, speak to a representative at High Point Federal Credit Union to learn about our fantastic home loan options.

Are you looking to refinance? Check out current mortgage rates at High Point Federal Credit Union!

Financing a Home Renovation with a Home Equity Loan

Q: I’m doing some home renovations this spring and I’m not sure how to finance this expense. There are so many options! Which one makes the most sense?

A: As a member of Olean Area Federal Credit Union, you have several options for funding a home renovation. You can open a HELOC, or a Home Equity Line Of Credit, which is an open credit line that’s secured by your home’s value for up to 10 years. You can also fund your renovations with an unsecured loan or use your credit cards.

One of the best ways to fund a home renovation, though, is by taking out a HEL, or a Home Equity Loan. Let’s take a closer look at this popular loan option.

What is a home equity loan?

A home equity loan is a loan secured by a home’s value. When homeowners open a HEL, they will receive a fixed amount of cash in one lump sum. Most home equity loans have a fixed interest rate, a fixed term and a fixed monthly payment.

What are the advantages of a home equity loan?

The primary benefit a HEL has over other loans is its fixed interest rate. This means the loan will not be subject to increasing interest rates and borrowers know exactly how much their monthly payment will be for the entire term of the loan. Also, the interest paid on a home equity loan is often 100% tax-deductible (consult your tax adviser for details).

Another benefit of the HEL is its repayment plan. Borrowers will be making payments toward the loan’s principal and interest throughout the term. At the end of the loan term, the entire balance will be paid in full.

Are there any disadvantages to taking out a home equity loan?

While a home equity loan offers the funds needed to cover a home improvement project with an affordable repayment plan, it’s important to know about every aspect of a HEL before applying.

Obtaining a HEL could potentially include closing costs. It’s best to find out if there are any fees and, if so, how much these fees will amount to before applying for the loan.

Also, when taking out a home equity loan, borrowers will receive their funds in one shot. This makes a HEL a great option for homeowners who know exactly what kind of work they will do on their homes. However, if they only have a vague idea about the renovations they want to do and how much they’ll cost, they may end up borrowing an insufficient amount.

Finally, borrowers will need to make a monthly payment on their loan throughout its life. Before taking out a HEL, be sure you can afford the payments.

Call, click, or stop by Olean Area Federal Credit Union to learn more about home equity loans and to start applying for your loan today.