Auto, home refinancing can lead to big savings

When you purchase a home or vehicle, you might have to work with the loan rate offered due to a variety of factors. Maybe your credit wasn’t up to par, or there was only one lender willing to give you credit to buy your dream car or home. If you’re in this situation, don’t give up on searching for a lower interest rate on your loan.

Here’s a look at how refinancing can improve your financial life.

Auto refinancing

Let’s review one scenario to see how a lower rate can save you money. Say that you currently owe $20,000 at 7.99 percent interest with 48 months left on the loan. That averages out to $518.43 per month payment. If you were able to refinance that loan at a 3.99 percent rate, your payment drops to $479.48 per month.

If your interest rate is even lower, perhaps 1.99 percent, the payment will be $460.71 per month. And if you manage to receive an ultra-low rate of 1.99 percent, you could save around $60 per month, which could go toward a tank of gas, groceries or another monthly expense.

Home refinancing

Mortgages have much higher monthly payments and the refinance of a mortgage, even if it is just one percentage point, can result in thousands of dollars in savings over the term of the loan. For instance, if your home loan balance is $300,000 with an interest rate of 5.5 percent, your monthly principle and interest payment would be $1,703.37.

If you refinance that balance at a 5.0 percent interest rate, the payment becomes $1,610.46, almost a $100 less. Trim another 0.5 percent to 4.5 percent, and the monthly mortgage payment drops to $1,520.06. What may seem like mere percentage points turns into almost $200 a month in savings.

Refinancing may seem like a hassle but it can save you money if you take the time to research your options.

If you’re interested in crunching the numbers, visit Travis Credit Union’s loan calculators to see how much refinancing your current balance may save you.

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