Continue to Monitor Your Credit After you've been approved to refinance your auto loan, it's still important to keep track of your credit and make adjustments as needed. That way, you'll be ready the next time you need to borrow money.
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You should consult your own attorney or seek specific advice from a legal professional regarding any legal issues. Kelley Blue Book offers resources and tools for finding used-car values. Some lenders may allow you to roll the outstanding balance on your current loan into your new loan, but keep in mind that this will add to your overall debt.
Lenders may have restrictions on whether they will refinance a car. If your credit has improved, refinancing could result in a lower interest rate, which could save you money in interest over the life of the loan. Checking your credit reports can also help you identify any potential errors that may be impacting your credit scores and work on disputing them.
You may need information like your Social Security number, previous addresses, and how much you pay in monthly mortgage or rent payments. A paycheck stub or a tax return may be needed. You might also be asked to provide your employment history. You may need to provide proof of insurance to your lender. Take some time to shop around and see which offers you may qualify for. Applying for prequalification can be a good place to start. To get prequalified, the lender will look at certain information, like your credit and type of vehicle.
However, if you submit all the applications within 14 to 45 days of each other , those multiple applications will only count as one inquiry. If you wait too long, you may miss the shopping window. In that case, each application will be treated as separate hard inquiries, and will have a greater negative impact on your credit score.
Be aware that the lender will conduct their own appraisal of the car. You may need to provide a recent pay stub or tax return for you and any co-borrowers. The auto loan refinance process is generally faster than a mortgage refinance, usually taking about two weeks from start to finish. The most important factor is the annual percentage rate APR and total interest paid over the life of the loan. The APR includes the interest rates and any fees, including the lender and title fees. You may be approved for several different interest rates and loan terms.
Loans with longer repayment terms generally have higher interest rates and lower monthly payments. Look at your budget and decide how much you can comfortably afford each month. Once the first lender is paid off by the new lender, they should return any extra payments you made during that window. Once the loan is paid off, you can start making payments to your new lender. Zina Kumok is a freelance personal finance writer based in Indianapolis.
She paid off her own student loans in three years. She also offers one-on-one financial coaching sessions at ConsciousCoins. She has won several national and state awards for uncovering employee discrimination at a government agency, and how the financial crisis impacted Florida banking and immigration. Select Region. United States. United Kingdom. When you first borrowed money to buy a car, it may have been through dealer-arranged financing. However, many banks, credit unions and online lenders offer direct financing to car buyers and owners.
In some cases, you may qualify for a loyalty discount based on your existing relationship with the bank or credit union. Take some time to compare that quote with rate offers from other banks and lenders. This process can take some time, but the more options you compare, the higher your chances will be of getting the best auto loan terms available to you.
If you decide to move forward with a new lender, there is some required information that you should have prepared. Gather information about your existing loan, including the loan balance, monthly payment and payoff amount — the last one is the current loan balance plus any interest that has accrued between your last payment date and the day the loan will be paid off.
Some lenders may also require proof of residence, such as a lease agreement, mortgage statement or utility bill, to make sure that they know where the car will be parked.
You also should prepare to share your credit score, income details and auto insurance information. The main mistake you can make when it comes to refinancing is timing. If any of the following scenarios apply to you, it may be worth it to stick with your current loan. The primary reason to consider refinancing is if you can qualify for a lower interest rate and save money in the long run.
Technically, you can refinance your car loan whenever you want, even shortly after you buy the vehicle. But depending on where you are in the repayment schedule, your actual savings can vary. You can use a car loan refinance calculator to run the numbers for your situation to see how much refinancing can save you. How We Make Money. Rebecca Betterton.
Written by. Rebecca Betterton is the auto loans reporter for Bankrate. She specializes in assisting readers in navigating the ins and outs of securely borrowing money to purchase a car.
Edited By Chelsea Wing.
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