5 Tips for Refinancing an Auto Loan #best #used #cars #to #buy

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5 Tips for Refinancing an Auto Loan

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5 Tips for Refinancing an Auto Loan

Since the end of 2008, and until U.S. unemployment and inflation rates drop and stabilize, the Federal Reserve is holding interest rates at historical lows, allowing financial institutions to offer appealing rates for new and used car loans. This regulatory climate also means that refinancing a car loan is a wise idea for people with existing loans at higher interest rates.

Refinancing auto loans is easier than many people might think. The application process is generally quick, taking no longer than 15 minutes, and many financial websites offer the ability to compare rates for multiple lenders who can compete for your business. When refinancing a car loan, be sure to follow Autobytel s top 5 auto loan refinancing tips.

Tip #1: Know Your Credit Score

Before you try to refinance your car loan, you need to know your credit score. This is particularly important for people who may be in a more or less advantageous financial position than they were when the current car loan was finalized.

If you know that your financial situation and your credit score have improved since your current car loan paperwork was originally signed, you should be able to get a lower interest rate on a new loan. If the opposite is true, it is more likely that a car owner will have a difficult time in obtaining a lower interest rate. That said, people who are currently in financial trouble should still explore their options for refinancing an auto loan as one way to get household finances under control.

Additionally, knowing your credit score in advance can help people who are refinancing a car loan to avoid being taken advantage of by an unscrupulous lender that might attempt to charge a higher interest rate and justify the higher rate by claiming the loan applicant has imperfect credit.

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5 Tips for Refinancing an Auto Loan

Tip #2: Know the Value of Your Car

If you are upside down on your current car loan, which means that the car is worth less than you owe on the existing loan, you will not be able to refinance the car loan. The reason is because the car itself is the collateral for the new car loan, and a lender will not allow you to finance a greater amount than it is worth.

To determine what you owe on your existing loan, check the most recent statement you received in the mail or via your online account. Next, determine the market value of your vehicle by cross-referencing at least three trusted sources for used car values. If the balance due on the existing car loan is greater than the current published value for the car, you likely cannot refinance your car loan.

Tip #3: Shop for Lower Car Loan Rates

When refinancing a car loan, be sure to talk about your options with your current lender before completing a loan application with another financial institution. Your current lender wants to retain your business, and might be able to make the process even easier because much of your detailed financial information is already on file.

Even if your current lender is interested in refinancing a car loan at a lower rate, be sure to shop around. Compare the new quoted rate with rates from other lenders using a finance-related website that offers the ability to search a database of financial institutions and rates based on the desired length of the loan, your geographic region, and other factors.

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5 Tips for Refinancing an Auto Loan

Tip #4: Watch Out for Restrictions and Hidden Fees

Oftentimes when refinancing a vehicle, a lender will require a minimum loan value in order to extend financing, so be sure you understand any restrictions associated with a loan program prior to completing a loan application. Also be sure to ask if there are any fees associated with the application. There are many financial institutions willing to help with refinancing auto loans that you shouldn t need to pay any document preparation fees or other tacked on extras.

Tip #5: Complete Loan Applications One at a Time

Now is a great time for refinancing a car loan. Interest rates are at record lows, and have nowhere to go but up in the years ahead. If you needed to accept a higher interest rate for your current car loan due to credit problems or other financial difficulties and your financial situation has since improved, refinancing an auto loan can save money every month. Alternatively, if you are struggling to make ends meet but still have excellent credit, refinancing a car loan can help give your monthly budget some breathing room. Either way, for borrowers, rates simply don t get better than they are today.

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