My sister called me the other day, asking about refinancing her car loan. Turns out, she’s been paying 5.75% on her loan, which is ridiculous with the rates currently available. Even worse, she’s been paying this high rate for three and a half years!
The moral of the story is this: be aware of what you are paying for your loans and credit cards, and also be aware of the market rates. That way, if you see that there is a big discrepancy between the available rates and your rates, you can try to improve the situation.
Why should you care? Let’s imagine you’re buying a car. You’ve found a good car and your loan will be $20,000. (Ack – that is a lot of money.) Because you are very smart, you don’t want to finance it for more than 36 months. With an interest rate of 5.75%, you’d be paying $606.00 per month. Oh, gosh, that makes my blood pressure go up just thinking about it. Now, let’s imagine that instead you financed your car through USAA at their currently available 1.45% interest. It is only good for up to 36 months, and for new cars (this model year or last model year). However, at 1.45% interest, the car payment would be $568.00. That is still a lot, but it is nearly $40 less per month and the only difference is that you shopped around for a good interest rate. And what if you got the better interest rate but paid $606.00 per month anyway? You’d pay off the car two months earlier and save over $1100 in interest.
USAA is not the only bank to have good interest rates, they are just the best I’ve found recently and I have had good customer service with my previous car loans with USAA.
If you buy a more expensive car, the savings are even greater. If you have credit cards or other loans, or a mortgage, keeping up with the interest rates can result in substantial savings. It takes a few minutes initially to gather all your information, then a few minutes each month to check the prevailing rates, but the benefits are worth it.