How to Refinance a Car
Get current on your loan., Ask about your current debt amount., Research your credit score., Investigate whether interest rates have come down., Consider refinancing if you're in a lengthy (5+ year) loan., Consider refinancing if your car is...
Step-by-Step Guide
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Step 1: Get current on your loan.
Those who are behind on payments for an auto loan may find it more difficult to refinance a car or other vehicle.
It sounds obvious, but it's worth stressing:
Getting current sends lenders a signal that you're serious about repaying the value of your car loan. -
Step 2: Ask about your current debt amount.
Call the bank, dealer or other party who currently holds your auto financing loan and ask for the pay-off amount.
This value will be part of the information that you give to other lenders in order to put together a refinancing package. , If it has improved, apply for refi.
In many cases, a better credit score results in better offers for loan refinancing.
Individuals with poor credit scores under 600 can have trouble finding good refinancing deals.
But on the other hand, some experts say that these are the people who could benefit most from lowering their interest rates.
If your credit score has improved just 50 points from what it was when you agreed to the original car loan, you should attempt to get your loan refinanced.An improvement of 50 points in your credit score can save you thousands of dollars over the life of the loan.There are many tips on how to improve your credit score, including reducing your debt to credit ratio, paying off other outstanding debts, getting rewarded for seniority, and disputing erroneous charges to your credit card. , When you borrow money, you're expected to pay back the original sum of the loan plus a little bit of interest for the privilege of being given the loan.
Interest rates are largely determined by a federal committee, depending on the current economic climate.If interest rates have come down since you applied for your car loan, it's worth trying to refinance — chances are that you'll pay less money in interest payments if the interest rates have gone down. , Many people look at their monthly payment as the bottom line when it comes to their auto loan.
They neglect to realize that the longer their loan, the more money they'll eventually pay in interest payments, even if their monthly payments are relatively low.Be sure, therefore, to pay attention to the length of the loan in addition to the monthly payments.
If your loan is anywhere from 5 to 8 years long, it's probably a good idea to try to refinance and reduce the length of your loan.
Even if refinancing only lowers your monthly payment by $10, paying off your loan two years earlier will result in significant savings over time. , Lenders are weary of refinancing older cars because the car itself becomes less valuable as collateral if the loan isn't fully paid.
For instance, a 2009 Jetta is much easier to refinance than a 2001 Camry, because the value of the Jetta is probably much higher than the value of the Camry.
You're more likely to get good terms if refinancing a newer car than you will trying to refinance an older car. , If you've come on a rough spell lately and cash is tight, trying to refi is worth it.
If you think the terms of your original loan make bad financial sense or are predatory, those are other good reasons to refi.
Do not refinance your auto loan, however, if:
There are prepayment or other fees associated with paying off your loan early or switching over to a new lender.
These fees make it financially onerous to refinance, which is why they exist in the first place.
Refinancing would extend the life of your loan.
You may save a little bit of money in your monthly payments, but extending the life of your loan will cause you to pay more money in overall interest payments.
This makes refinancing a bad idea if your aim is to save money. -
Step 3: Research your credit score.
-
Step 4: Investigate whether interest rates have come down.
-
Step 5: Consider refinancing if you're in a lengthy (5+ year) loan.
-
Step 6: Consider refinancing if your car is relatively new.
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Step 7: If other financial circumstances have changed
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Step 8: consider refinancing.
Detailed Guide
Those who are behind on payments for an auto loan may find it more difficult to refinance a car or other vehicle.
It sounds obvious, but it's worth stressing:
Getting current sends lenders a signal that you're serious about repaying the value of your car loan.
Call the bank, dealer or other party who currently holds your auto financing loan and ask for the pay-off amount.
This value will be part of the information that you give to other lenders in order to put together a refinancing package. , If it has improved, apply for refi.
In many cases, a better credit score results in better offers for loan refinancing.
Individuals with poor credit scores under 600 can have trouble finding good refinancing deals.
But on the other hand, some experts say that these are the people who could benefit most from lowering their interest rates.
If your credit score has improved just 50 points from what it was when you agreed to the original car loan, you should attempt to get your loan refinanced.An improvement of 50 points in your credit score can save you thousands of dollars over the life of the loan.There are many tips on how to improve your credit score, including reducing your debt to credit ratio, paying off other outstanding debts, getting rewarded for seniority, and disputing erroneous charges to your credit card. , When you borrow money, you're expected to pay back the original sum of the loan plus a little bit of interest for the privilege of being given the loan.
Interest rates are largely determined by a federal committee, depending on the current economic climate.If interest rates have come down since you applied for your car loan, it's worth trying to refinance — chances are that you'll pay less money in interest payments if the interest rates have gone down. , Many people look at their monthly payment as the bottom line when it comes to their auto loan.
They neglect to realize that the longer their loan, the more money they'll eventually pay in interest payments, even if their monthly payments are relatively low.Be sure, therefore, to pay attention to the length of the loan in addition to the monthly payments.
If your loan is anywhere from 5 to 8 years long, it's probably a good idea to try to refinance and reduce the length of your loan.
Even if refinancing only lowers your monthly payment by $10, paying off your loan two years earlier will result in significant savings over time. , Lenders are weary of refinancing older cars because the car itself becomes less valuable as collateral if the loan isn't fully paid.
For instance, a 2009 Jetta is much easier to refinance than a 2001 Camry, because the value of the Jetta is probably much higher than the value of the Camry.
You're more likely to get good terms if refinancing a newer car than you will trying to refinance an older car. , If you've come on a rough spell lately and cash is tight, trying to refi is worth it.
If you think the terms of your original loan make bad financial sense or are predatory, those are other good reasons to refi.
Do not refinance your auto loan, however, if:
There are prepayment or other fees associated with paying off your loan early or switching over to a new lender.
These fees make it financially onerous to refinance, which is why they exist in the first place.
Refinancing would extend the life of your loan.
You may save a little bit of money in your monthly payments, but extending the life of your loan will cause you to pay more money in overall interest payments.
This makes refinancing a bad idea if your aim is to save money.
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Teresa Hart
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