Should I refinance my car loan?

Should I refinance my car loan?
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#1

My current remaining balance is $16,322.00. APR is 16.25%, and the remaining term is 43 months. The current monthly payment is $518.17.00.

I do plan on trading in my vehicle soon, it’s a 2016 Jeep Renegade with a little over 50,000 miles.

I have been pre-approved for refinancing with the following terms:
monthly payment: $474.00
APR: 11.12%
term: 43 months

I’m also trying to build my credit, so I wouldn’t want it to cause a significant decline in my credit score.

I’d appreciate any advice.


#2

Hi rubymanri, and welcome to the NerdWallet community!

As you have already discovered, refinancing a car can result in significant savings.

First, a couple of questions for you. You said you plan to trade your vehicle “soon.” What do you mean by that? Also, does your current loan have a prepayment penalty?

When you were preapproved, was a hard credit inquiry done? (A hard inquiry can shave a few points off your credit score, and multiple hard inquiries can really hurt.) If and when you trade in your car, there is likely going to be another hard inquiry if you choose to finance, so that may be something to think about.

And if you are going to trade your Renegade in soon, the savings and potential ding to your credit score might not be worth it. But those are calculations for you to make.