Refinancing your car loan could save hundreds perhaps thousands of dollars over the term of the auto loan. You may even be to refinance your present loan and get cash back! Refinancing your car loan is usually quick and easy. Unlike refinancing your home or consolidating credit card balances no appraisal is required and if any fees are required they are usually minimal.
Auto refinance isn’t for everyone but it makes sense if you are in one of the following situations.
- High Interest Rate: If you financed your car through the dealership you may have paid higher interest rates. Dealers often charge you “points” on or higher interest rates on loans financed through their finance sources.
- Auto Loan Interest Rates Improved: If interest rates were high when you bought your car it may be a good time to refinance. Even if interest rates have dropped a couple of points since you purchased your vehicle you could save money.
- Better Credit Score: If you had credit issues or negative information on your credit report that has since improved you may qualify for lower interest rates.
- Lease Expiring: Your car lease is expiring and you want to purchase the vehicle. When you fulfill the terms of a lease, you typically have the option to buy the vehicle.
- Personal Finance Hardship: If you have had some financial setbacks and need to reduce your payments refinancing could be a solution by increasing the term of the loan terms thus lowering the monthly payment.
Refinancing isn’t an option for everyone. If the vehicle is worth less than the car loan balance – called “upside down” a lender probably won’t take the chance and at the same time lower your interest rate. Other requirements may also disqualify you, such as the age of the vehicle and the outstanding balance to be refinanced. It is important that you determine if their current car loan has any penalties for paying off the loan early. This will impact how much you can save from refinancing.
Steps to Refinance Your Car Loan:
- Call Your Lender: Request the current payoff amount of your loan. This is the amount of money you need to refinance. It is also the figure you will compare against the vehicle’s value to determine if the vehicle is worth more than the amount you need to borrow. Once you know your payoff, you can determine how much refinancing can save each month.
There is no required amount of time from the date of the original loan until you can refinance. Since most auto loans are structured so that the majority of the interest is paid during the first half of the term of the loan. The more recent the current loan the more money refinancing will usually save.
- Apply for an Auto Refinance Loan: Approvals are fairly simple and approved quickly. Many lenders can provide you a decision within 24 hours of submitting the online application.