HOW CAN I REFINANCE MY CAR?
Refinancing your car loan may be beneficial in many situations. For example, if your credit score has improved recently, you could likely reduce your interest rate and the monthly installment. Additionally, you could reduce the loan length or extend the loan repayment and lower your monthly payment. Refinancing a loan typically takes under an hour, and many lenders will approve loans in less than a minute. So, if you are asking yourself, “how can I refinance my car”, you are in the right place!
BENEFITS OF REFINANCING A CAR LOAN
There are many advantages to refinancing your vehicle loan. Keep in mind that some of these refinance benefits are dependent on market conditions. A few benefits to refinancing your auto loan may be:
1. LOWER INTEREST RATES
There are a couple of different ways that you could enjoy lower interest rates. First, if your credit score has improved since you bought the vehicle. Additionally, you could lower interest rates if market interest rates have dropped and you are eligible for lower interest rates.
2. LOWER MONTHLY PAYMENT
If you stick to the same repayment period and interest rate, lower rates are usually reflected in lower monthly installments. If you’d like to reduce your monthly payments even further, you may extend the length of the loan. This could mean greater interest costs for the duration of your loan; however, it’s beneficial if your budget for the month is in a tight spot.
3. PAY OFF DEBTS SOONER
On the other hand, you can also opt for the shorter term for your repayment. A shorter-term typically means low-interest costs. This means you will pay less and get rid of debt quicker, though the monthly installments will be higher.
WHEN TO CONSIDER REFINANCING YOUR VEHICLE?
Refinancing a car isn’t suitable for everyone, and deciding when to refinance can be difficult. There are instances where refinancing your car could help you. You might consider refinancing your vehicle when one of the following scenarios could apply to you.
YOUR CREDIT SCORE INCREASED
Your credit score can be among the most important factors a lender considers when deciding on a loan’s approval and terms. If you purchased your car with a poor credit rating, refinancing the car could result in a better interest rate. This can lower the amount you pay each month.
THE INTEREST RATES HAVE FALLEN
If you bought your car at a time when rates of interest were high, you might be able to save money by refinancing your car. It might be more than you think. A decrease in interest rate from 2 to 3 percent could save hundreds of dollars if you don’t extend the loan’s term.
An auto loan interest and payment calculator will show you the impact of interest rates on your monthly payment as well as the total cost you will spend on interest.
YOU DIDN’T COMPARE RATES WHEN YOU FIRST STARTED
If you received your original credit from the dealer who sold you the car, you probably spent too much. Buyers do not always look up their credit scores or research interest rates before visiting the dealership, and their loan terms could have been impacted by it. If you accepted the loan offer offered by the dealership without understanding the options available, you might not have received the most favorable deal.
Do you think this happened to you? Chat with one of our auto loan specialists to see what your options are.
HOW CAN I REFINANCE MY CAR?
So, how can I refinance my car? These are the steps to follow to refinance the auto loan you have:
GATHER THE REQUIRED DOCUMENTS
- Personal Information – if you are a current CFCCU member, we will already have your information. If you not a member, we will need your name, social, phone number, address.
- Evidence Of Income – lenders need to know you’ll be able to repay the loan. You will need to give employment information and proof of income may be needed.
- Evidence Of Car Insurance – you may be required to provide insurance evidence to satisfy your loan. If that’s the case, you’ll need to be able to prove this to the lender using the insurance certificate or other evidence of insurance.
- Details About Your Current Loan – it’s possible to need the amount of your current auto loan and the lender’s details. It’s also beneficial to know the rate of interest and the length of the loan in order to ensure you’re getting better deals.
- Information On The Vehicle – you’ll need to have the car’s model, make of the car, mileage, and year in your possession. The number for identification of the vehicle (VIN) can be found on the lower corner on the driver’s side of the windshield. However, the exact location can vary dependent on the model and the model vehicle.
DON’T ASSUME THE DEALERSHIP’S TERMS ARE THE BEST
The most effective way to increase the savings you can make is to talk with your local credit union.
TALK WITH YOUR LOCAL CREDIT UNION
While your credit union may not come to mind right away when car shopping, it can make a large difference when evaluating what options are best for you. Additionally, credit unions can offer services, like payment protection, guaranteed asset protection (GAP), warranty protection, and vehicle depreciation protection that are often more beneficial than what a dealership can provide.
REVIEW THE TERMS AND SIGN THE CONTRACT
After you’ve completed your application, the lender will undergo the process of underwriting to determine if you’re eligible and what your loan’s terms will be. If you agree, you can accept the contract, which will allow the lending institution to take care of the loan you have already taken out.
The contract will notify you when you’ll be required to start making payments for the loan. Be sure to plan this change into the loan reasonably so that you do not miss payments. Be attentive to any communication between your old lender as well as your new one to ensure all is in order.
AVOID THESE MISTAKES WHILE REFINANCING YOUR CAR LOAN
Refinancing your car loan doesn’t always make financial sense. The biggest mistake you could make when refinancing is not doing it at the right time. If any of these scenarios apply to your situation, staying on your current loan might be beneficial.
YOU’RE CLOSE TO THE REPAYMENT OF YOUR ORIGINAL LOAN
With the process of amortization, the interest rates gradually diminish over the course that the loan is in force. Therefore, refinancing can save you money when you’re in the initial stages of repaying the initial loan.
UNDERWATER ON THE ORIGINAL LOAN
The majority of lenders will not refinance in cases where the borrower has a debt that is greater than the value of the vehicle (also called “underwater”).
THE CURRENT LOAN COMES WITH AN EARLY PAYMENT PENALTY
Certain lenders charge a fee for repaying your car loan in advance. If you decide to refinance your loan, you should review the current loan conditions to ensure that there isn’t any prepayment penalty.
SHOULD I REFINANCE MY AUTO LOAN?
Refinancing is a good option to get the best auto loan that meets your requirements. When you gather the necessary information and conduct your research, you can obtain better terms on your loan, which can help you save money, as well as offer the lowest cost.