How to Reduce the Monthly Car Payments You Are Paying
Determine if your credit rating has improved since you took out your original loan., Review the information on the credit report to verify that it is correct., Take action to improve your credit rating., Apply for a refinanced loan.
Step-by-Step Guide
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Step 1: Determine if your credit rating has improved since you took out your original loan.
Lending institutions, like banks, use credit ratings.
The rating is used to evaluate the risk of lending to a particular borrower.
The rating may also be referred to as a credit score.Your credit rating is determined by information reported to credit bureaus.
Your lenders (banks and credit card companies) report information to credit bureaus.
That information includes data on your loan balances and payment history.
The data is used to calculate a credit rating.
The higher your rating is, the more likely that you will get approval for your loan.
Experian, Equifax and TransUnion are three main credit bureaus that are frequently used by lenders.You can get your credit report once a year for free.
However, the report does not contain your credit score.
This article explains how to check the score itself:
Check Your Credit Score. -
Step 2: Review the information on the credit report to verify that it is correct.
Say, for example, that your credit card company reported a late payment.
You actually made the payment on time.
Ask the bureau what documentation they need to correct your credit report.
Contact the lender who reported the incorrect data.
In this example, your bank statements would prove that you made the payment on time.
The date of the payment will be posted in your bank activity.
Ask the credit card company to correct the information reported to the credit bureau.
Keep documentation of that correction.
Ask your lender what credit rating they used when your loan was approved.
That rating may be in your loan documents.
Compare that rating to your current credit rating.
If you rating has improved, you may be able to refinance your loan. , If your credit rating has not improved, wait to apply for refinancing.
If you don’t have a higher rating, you may not get your refinancing approved.
Instead, make the effort to improve your credit rating.Continue to use credit.
Using credit wisely proves to a lender that you’re a reliable borrower who will pay on time.
For example, you should use credit cards for some of your purchases.
Make payments on time.
It’s critical that you pay every debt on time.
The timely payments will build your credit history.
Lenders are not obligated to report all credit transactions to credit bureaus.
As you use debt responsibly, make sure the information is reported to credit bureaus.
Ask your lender to report the data.
Review your credit bureau information to make sure the information was posted. , In addition to your personal credit rating, another big factor in your loan is the interest rate.
If interest rates have declined, you are more likely to refinance your loan at a lower interest rate.
On the other hand, if interest rates have increased, you may not be able to lower your car payments by refinancing.
Regardless of your credit rating, higher rates may eliminate refinancing as an option.The loan balance you are refinancing needs to be less than the current value of your car.
Remember that the car serves as collateral for the loan.
If you defaulted on your loan, the lender would take ownership of the vehicle.
If the loan balance is higher than the value of the car, the lender would lose money when they sell the car.
Approach several lenders about applying for a refinanced loan.
You may be able to lower your interest rate if you check with more than one lender.
Your credit rating is impacted by the number of times you access your credit report.
A credit rating is also affected each time you apply for a loan.
Keep this in mind as you work on refinancing.
Your lender can help you limit this activity. -
Step 3: Take action to improve your credit rating.
-
Step 4: Apply for a refinanced loan.
Detailed Guide
Lending institutions, like banks, use credit ratings.
The rating is used to evaluate the risk of lending to a particular borrower.
The rating may also be referred to as a credit score.Your credit rating is determined by information reported to credit bureaus.
Your lenders (banks and credit card companies) report information to credit bureaus.
That information includes data on your loan balances and payment history.
The data is used to calculate a credit rating.
The higher your rating is, the more likely that you will get approval for your loan.
Experian, Equifax and TransUnion are three main credit bureaus that are frequently used by lenders.You can get your credit report once a year for free.
However, the report does not contain your credit score.
This article explains how to check the score itself:
Check Your Credit Score.
Say, for example, that your credit card company reported a late payment.
You actually made the payment on time.
Ask the bureau what documentation they need to correct your credit report.
Contact the lender who reported the incorrect data.
In this example, your bank statements would prove that you made the payment on time.
The date of the payment will be posted in your bank activity.
Ask the credit card company to correct the information reported to the credit bureau.
Keep documentation of that correction.
Ask your lender what credit rating they used when your loan was approved.
That rating may be in your loan documents.
Compare that rating to your current credit rating.
If you rating has improved, you may be able to refinance your loan. , If your credit rating has not improved, wait to apply for refinancing.
If you don’t have a higher rating, you may not get your refinancing approved.
Instead, make the effort to improve your credit rating.Continue to use credit.
Using credit wisely proves to a lender that you’re a reliable borrower who will pay on time.
For example, you should use credit cards for some of your purchases.
Make payments on time.
It’s critical that you pay every debt on time.
The timely payments will build your credit history.
Lenders are not obligated to report all credit transactions to credit bureaus.
As you use debt responsibly, make sure the information is reported to credit bureaus.
Ask your lender to report the data.
Review your credit bureau information to make sure the information was posted. , In addition to your personal credit rating, another big factor in your loan is the interest rate.
If interest rates have declined, you are more likely to refinance your loan at a lower interest rate.
On the other hand, if interest rates have increased, you may not be able to lower your car payments by refinancing.
Regardless of your credit rating, higher rates may eliminate refinancing as an option.The loan balance you are refinancing needs to be less than the current value of your car.
Remember that the car serves as collateral for the loan.
If you defaulted on your loan, the lender would take ownership of the vehicle.
If the loan balance is higher than the value of the car, the lender would lose money when they sell the car.
Approach several lenders about applying for a refinanced loan.
You may be able to lower your interest rate if you check with more than one lender.
Your credit rating is impacted by the number of times you access your credit report.
A credit rating is also affected each time you apply for a loan.
Keep this in mind as you work on refinancing.
Your lender can help you limit this activity.
About the Author
Ann Robinson
Professional writer focused on creating easy-to-follow hobbies tutorials.
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