How to Refinance a Car
Many homeowners make a beeline for home refinancing whenever interest rates drop. Indeed, home refinancing is a great option if you spend a whopping amount on monthly payments owing to very high interest rates. However, many of them also pay hefty monthly payments on their car loans. What they do not know is that they can also get car refinancing in the same way as mortgage refinancing. If you choose to refinance your car, you may be able to save hundreds of dollars every month on car loan repayment and thousands of dollars during the loan tenure. If you are interested in refinancing your car loan but aren't sure how to go about it, here is some advice on refinancing a car.
Tips on How to Refinance a Car
Car loan refinancing means paying off your current car loan by getting a car refinance loan from another lender at lower interest rates. For example, if you are currently paying $500 towards monthly auto loan repayment at an interest rate of 11%, you may get this loan refinanced at a new interest rate of say 8%. As a result, your monthly payment amount may come down to $400. Thus, you can save as much as $100 every month. This amount is considerably high considering the large span over which a loan repayment is spread. Thus, there is no doubt that car loan refinancing is a great money saver option. Follow these steps on car loan refinancing.
Get in Touch with Your Current Lender
Now that you know refinancing is definitely an option for you, go about it in a systematic way. Get in touch with your existing lender and get a quote on the pay-off amount. Remember, pay-off amount is not the same as balance in your loan account. Also check the expiry date of this quote. If you are going to take long for refinancing, then ask for a farther date of expiry.
Search for an Appropriate Lender
As soon as you are informed about the plummeting interest rates on auto finance, get in touch with various lenders. Compare their rates and check their criteria for auto refinancing. You can get interest rates of various lenders on the Internet as well. Make sure the APR is low enough for you to land in a profitable situation. Apply only to those money lending institutions where you have a chance of loan approval. Loan denials can have a bad impact on your credit scores. Hence, it is important to check the refinancing criteria before applying for the loan. Most lenders will demand a decent credit score to be eligible for refinancing. Car refinance with bad credit is also available, but then you might have to approach lenders who specialize in bad credit auto loans.
Fulfill the Criteria
Collect all important documents such as your vehicle's registration papers and be prepared with information such as Vehicle Identification Number (VIN), make and model of your car, year etc. You may need additional documents such as your account statement, pay stubs etc., if you do not have particularly good credit scores. Your debt to income ratio can also be assessed in that case. People with less than perfect credit scores need to be more patient as they have to undergo additional scrutiny. They may also not get very attractive interest rates.
Refinancing may not be for everyone, hence, make sure you are a candidate for car refinancing before you apply. For others, this can be a great way to get rid of your financial woes.
