Refinancing can be an option after taking out a loan in order to buy a car. Refinance your vehicle loan and you could get a lower rate of interest or a shorter repayment term. This could help to save you money.
It is important to avoid jumping into the process. It’s best to do your research, learn the basics of refinancing and then make an informed decision.
Can you refinance your car loan?
The short answer is that you can refinance car loans. Refinance to a lower interest rate is possible if your interest rates dropped since you took out a car loan. This will lower your monthly car payment and reduce interest payments over the term of the loan.
If you’re thinking about refinancing your car loan, there are a few things you need to know first. One of the most important things to consider is the interest rate you’ll be paying on your new loan. The auto refinance calculator on our website can help you figure out the best option for you. Keep your credit score in check.
How does car refinancing work?
You will take out a new loan, with different terms, to replace your original car loan. Once you have been approved for the loan, you will start paying monthly.
You have the option of refinancing with your existing lender or choosing a new lender after comparing fees, rates, and special offers.
Things you should know before refinancing
Although it can be more cost-effective to buy a car than you might think, refinancing could mean that you end up paying higher in the long term. Know these four essential facts before you decide to refinance.
1. How to compare and shop around for lenders?
In addition to the current lender, compare the offerings from auto finance companies and online lenders. This will ensure the highest rate possible.
Keep in mind, that applying for an automobile loan refinance will count as a credit inquiry. This can result in a lower credit score. All applications submitted within a time limit will count as one request.
2. What fees you may have to pay?
To help pay off the loan early, some lenders add a prepayment penalty to the car loan agreement. Check to see if the prepayment penalties are included in your current loan agreement. They could negate any savings from refinancing.
You may be required to pay a registration fee, application fee, and/or transfer fee depending on the lender. If you are refinancing your vehicle, you might be required to re-register it. However, this cost will vary depending upon where you live.
3. Your car’s valuation
Do your research about the market value of your car before you reach out for any loans? This value can usually be determined by your car’s make and model, year, and miles. The national automobile dealers association has (nada), guides and commercial websites.
Once you determine the actual value of your current vehicle, you will be able to decide whether you should refinance it or whether it would make more sense to sell it. Before approving the refinance application, the lender will also appraise your vehicle’s value. You won’t get approved if the vehicle’s value is too high.
4. Refinancing requirements
Every lender has different refinancing requirements. Be sure to ask as many as possible when shopping around, and get all the details you need before you apply.
