Refinance auto loan
Thinking about refinancing a car loan, but do not know where to start? Refinancing should help reduce the monthly payment, somewhat relax financial stress and reduce the total cost of interest. In order for the changes in the loan agreement to improve the situation, you need to understand how the system works and how to carry out the procedure correctly.
How does car loan refinancing work?
Refinancing a car loan means that the client receives a new loan and all arrangements under the old one are terminated. You will make payments on a new loan, and the new lender will appear in the loan agreement. If you already have a loan for a car, you should periodically be interested in offers from different banks. Using this service, you can save a lot of money.
In order to go through the refinancing procedure correctly, you should be aware of some things.
When should you try to refinance a car loan?
Interest rates have decreased . Regularly follow the loans of your and other banks. If you see that interest rates on the same loan as you or many others have decreased, it may be worthwhile to request a service from a bank and reduce your interest. Reducing the rate even at a fraction of a percent can save you thousands of rubles or allow you to close a loan earlier.
Your credit history has improved . If your score is better than it was when you made out a loan, you can qualify for the best interest rates. Simple things like paid payments on time can help you get better conditions. So, periodically check your credit history.
You took out a loan at a car dealership. If you were funded directly in the showroom, you have a chance to get a loan with a lower rate. Car dealers often overestimate percentages by several points. So, do not forget that you may be eligible for another lender.
Another loan payment is torture for you . Whatever the reason (job loss or unforeseen expenses), if you hardly make every loan payment for a car, refinancing can help you. Even if the bank agrees to reduce interest only by extending the loan term, it can help you cope with temporary difficulties.
Such refinancing can also help in the event of a major event in your life. If you bought a new home, a child was born, or sent children to study, an increase in the loan term and a decrease in the monthly payment can also help you.
Get acquainted with the offers from banks
In order not to waste time in vain, before submitting an application to a bank for refinancing, prepare to answer some questions and submit the necessary documents.
Documents. Make sure all your documents are in order. In some cases, you will need a social security number, driver’s license and car registration. It will not be superfluous to have on hand a VIN-number of the car. Also, it will be useful to know the remaining debt on the loan you are going to refinance.
Read the detailed refinancing terms. Lenders often have rules for refinancing auto loans. For example, the minimum balance on a loan of $ 5,000 and less than 120,000 km on a car speedometer. Having learned about similar requirements of different banks, you can save yourself a lot of time.
Do not forget that every application to the bank for refinancing a loan entails a hard inquiry of your credit history, which can worsen your score. Therefore, try to make all requests within 15 days then, if you are lucky, the CII will group all your requests into one.
Use all sorts of calculators with potential lenders to make sure you can really save. Make sure you save on monthly payments and for the duration of the loan. Consider any possible fines, for example, for early repayment of a current loan.