Refinancing your auto loan with a low-interest rate can help you save money and keep your car. However, it is important to fully understand the process and compare rates before you apply. Refinancing is a good choice if you have excellent credit. You can also get better rates if your current interest rate is low due to financing at a dealership.
What’s Auto Refinancing?
Refinancing an auto loan is when you take out a new loan to repay an existing loan. This can lower interest rates lower monthly payments, or both depending on the loan you are eligible for.
When would it be a good idea for you to auto refinance?
If you can get approval for a loan with lower rates, refinancing an auto loan can be a smart idea. You could save money if your credit score has improved since taking out your current loan.
It is important to evaluate where you are at the end of the loan’s life. It may not be worth it if you have only a few months remaining or your credit score is the same as when your first application for your car loan was made.
Prequalify with lenders to determine if you are eligible for a lower interest rate or a shorter term. An auto loan refinances calculator will help you determine if refinancing is right for you.
How To Save Money On Your Auto Loan Refinance?
Refinance your auto loan to get more cash back.
Lower Your Interest Rates
A refinance of your car loan can help you add money to your monthly budget. You may be eligible for a lower interest rate depending on your credit rating and details of the loan. This could help you save money over the term of your loan.
Lower Your Monthly Payment
Your monthly payments may drop depending on your current loan terms and the details of the new loan. Term extension may help. However, simply extending the term will increase the overall cost as you will pay more interest.
However, you can either keep the term the same or reduce it. A better interest rate will lower your monthly payments as well as your total interest.
Refinance Your Car Loan
It is as important to understand the process of car loan refinancing as it is to know the benefits. These are the four steps you need to take when refinancing your car loan.
1. Your Credit Score And Your Report Are Available
To refinance a car loan, it is necessary to verify your credit rating and report.
2. Compare Rates And Shop Around
Compare auto loan rates from multiple lenders once you have a good credit score. Before you submit a complete application, make sure to prequalify with multiple lenders. Prequalifying with multiple lenders before applying will save you time and help your credit score.
3. Apply For An Auto Refinance Loan
After finding the best rate, you will be able to complete the application online or over the phone, depending on which lender. Before you sign, make sure you read all terms.
4. Repay Your Current Loan
Either you will receive a check, or the new lender will repay your existing loan. You can continue making payments until your loan is paid in full.
The Bottom Line
If your current rate is higher than the market, refinancing an auto loan could save you money. Only do it if you feel it will help you save money. You might consider other options if you are looking to reduce your monthly payments but would need to extend your loan term.