Auto Loans

Refinancing Auto Loans 101

If you’re paying too much in interest on your car or truck loan, refinancing could be a great way to save some serious dough. Interest rates for vehicle loans may have dropped since you financed your auto. Or maybe you’ve improved your credit score, which could qualify you for a lower rate. Either way, it could be worth hundreds of dollars in savings to get a new auto loan to replace your current one.

The process is fairly simple. You’ll need to contact your current lender to get your loan’s payoff information. Then, you can apply for financing from a new lender that offers a lower interest rate. You’ll typically be asked to provide recent account statements, W-2s or other proof of income, and give permission for the lender to run a credit check. You can usually receive a response within a day. Once approved, the funds can be sent to pay off your existing loan, and the title would be transferred to the new lender.

Money-saving scenario

Suppose last year you financed $25,000 at 8% interest for a five-year car loan. Your monthly principal and interest payment would be about $507. But say today you could refinance the balance (just over $20,000) for the remaining four years at a lower rate of 3%. Your payment would drop to $451. That’s a savings of $56 a month, or $2,688 over four years, with the same payoff date.

You could also refinance for a longer loan term. This could reduce your monthly payment and give you more room in your personal budget. If your income drops or you have unexpected expenses, refinancing to a lower monthly payment could be one way to make sure you can pay your bills.

Choose carefully

For all the potential positives of an auto refinancing, there could be some drawbacks. If the new loan pushes your payoff date further into the future, you could end up paying more money overall in interest. Also, any new loan may incur title and registration fees, which vary by state. If you do refinance, don’t forget to tell your insurer.

There could also be costs to get out of your old loan. If you have a prepayment penalty, or the lender requires you to pay all remaining interest upfront, it would reduce your savings from refinancing.

Some car loans are “frontloaded” so your monthly bill mostly pays for interest during the first part of the term. If you’ve had your existing loan for a few years, your remaining payments would mostly go toward principal. That means a refi, even at a lower rate, may not save you enough to justify the cost.
Be sure to add up all the fees for paying off your old loan. Then, compare that amount to how much you’d save with a refinance, and see whether the benefits outweigh the costs.

An auto loan refinance can be a smart move in the right situations. By receiving a lower rate, you could cut your interest costs, reduce your monthly payment and save big.

© Copyright 2016 NerdWallet, Inc. All Rights Reserved.

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Credit Union Day

International Credit Union Day Celebrates The Authentic Difference

On October 20, 2016, credit unions around the world will celebrate International Credit Union Day (ICU Day).

Credit unions are not-for-profit financial cooperatives, offering the same services as other financial institutions, but with a people-first philosophy. Since 1948, on the third Thursday of every October, credit unions have celebrated the principles that make credit unions the best financial partners of people all over the world. “The authentic difference,” this year’s ICU Day theme, zeroes in on what makes credit unions different from banks, fintech startups and other financial institutions—our principles.

Credit unions all over the world have operated according to the same core principles since the 1850s, when a group of weary German workers, tired of being exploited by loan sharks, formed the world’s first credit union by banding together to provide affordable credit to each other.

These principles are derived from the 7 cooperative principles, shared by all cooperatives. They are:

1. Democratic Control
One member = One vote. Whether you have $5 or $5 million, your voice is equal.

2. Open and Voluntary Membership
Members are connected by a bond of association, fostering a sense of community.

3. Non-Discrimination
Credit unions are open to all without regard for race, orientation, nationality, sex, religion, gender, or politics.

4. Service to Members
Credit unions are ranked No. 1 in service in numerous surveys, because they exist to serve members, not profit.

5. Distribution to Members
Credit unions return all profits to their members through dividends, lower fees, better savings rates, and improved services.

6. Building Financial Stability
Credit unions are historically stable organizations. They’re owned by the people they serve, so they don’t take unnecessary risks.

7. Cooperation Among Cooperatives
Credit unions and cooperatives share the same principles. Together, they amplify each other’s good works.

8. Social Responsibility
Credit unions strive for social justice by committing to strengthening their communities and helping people of modest means.

9. Ongoing Education
Credit unions prioritize financial education for their members, employees, and communities as part of their pursuit of social justice.

This is why we celebrate ICU Day at ProMedica Federal Credit Union. We think ideas like people before profit, social responsibility, and financial education improve lives. It’s why cooperative banking is a key component of helping people in developing countries get access to microloans, or a middle-class couple in Northwest Ohio receive an affordable mortgage for their first home.

So when we wish you a Happy ICU Day at ProMedica FCU, know that we’re thanking you for belonging to a movement that’s helping your neighbors—and people around the world—grow and thrive and follow their dreams.

If you have any questions about the credit union philosophy or how ProMedica FCUcan help you, stop by or contact us at 419-479-4040 or at memberservices@promedicafcu.com.

Copyright 2016 Credit Union National Association Inc. Information subject to change without notice. For use with members of a single credit union. All other rights reserved.

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