6 Steps to Refinancing an Auto Loan: Refinance Car Loan Rates
Refinancing a car to a lower interest rate can save you considerable amount of money as it lowers your monthly payments. It is not much difficult to refinance a car, but remember that most of the lenders don’t refinance their auto loans and you need to approach different lender.
Is refinancing right for you?
- If your credit score has been improved, you can get loan at lower interest rate and you can consider refinancing for your car loan. It can save you few hundred dollars over the time span of loan.
- There are several ways to improve your credit score that includes paying off your outstanding debts, lower debit to credit ratio, you are rewarded for seniority etc.
- Interest rate varies with changing economic scenario and it might happen that interest rates have been reduced significantly in comparison to the time you had got your loan sanctioned.
- Usually car financing through dealership is offered at higher interest rate; if you have financed your car through a dealership, you can look for some other sources which offer loan at lower rate.
What information do you need for refinancing?
You need to provide certain documents when you apply for refinancing.
- You need your current loan documents.
- You also need to provide your vehicle identification number and your car mileage traveled.
Steps to Refinance your Loan
1. Review your existing auto loan
Before you apply for refinancing, you have to collect your payment stub from your current loan and need to know where you stand. You have to find out
- Current monthly payment.
- Number of months left to repay your loan.
- Current pay off amount.
- Current interest rate you are paying on the loan.
- Pre-payment penalty, if there is any.
2. Check if your car qualifies for refinancing
You need to satisfy certain requirements to qualify for the refinancing. Most of the banks will not refinance if:
- The current loan pay off amount is less than $7,500.
- Your car is older than specified limit.
- Mileage cap is reached; it varies with particular bank, usually in the range 70,000 – 100,000 miles.
- The car is being used for commercial purpose.
- Your car has received a salvage title.
- You also won’t have much luck refinancing a motorcycle or RV.
- Certain vehicle makes or models are not considered for refinancing.
3. Compare Bank Rates
You find interest rate for used car loan from different banks and compare them. You can search online or call different lenders. You also try to calculate how much difference it will make in comparison to old loan.
4. Evaluate your Credit History
If you have made your payments for a time period of a year or more, you will have improved your credit and you hold a good chance that refinancing would be easier. You can get the credit score from one of the recognized credit report agencies.
5. Apply for auto loan refinance
Once you have made all the calculations and if you feel refinancing is going to be beneficial, you apply for it at the bank that offers you the lowest rate. The application process is a quick process; you need to submit all required documents within a specified time period.
6. Complete the Process
Follow the instructions from the lender. You complete the loan paperwork as instructed. You will need to sign loan documents. A new loan will be at new interest rate and new term length. The lender will pay off the old loan and you will have to make payments to the new lender as dictated.
If you are considering refinance your auto loan, follow the guideline given above and save substantially with lower interest rate.
More Related Queries:
- Refinancing a car calculator
- Refinance car loan rates/ with the same lender