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If you refinance an auto loan, you substitute your outstanding loan for one that offers you a lower interest rate, changes the terms of your loan, or decreases the overall monthly car payments — or even all three.
Several aspects, including your payment history and credit reports, influence whether you are eligible to refinance your auto loan rate, but that brings us to our first question…
Should You Refinance Your Auto Loan?
People refinance auto loans for a variety of purposes. They may be required to discharge a co-borrower from a current auto loan. Alternatively, they could wish to reduce the length of the loan so they can pay it off quicker.
Reducing expenses and saving money are two of the most prevalent reasons for refinancing a car and overall, refinancing your car loan can have a lot of benefits, so it is something that everyone should at least consider.
Here Are Some Reason To Consider A Refinance On Your Auto Loan
Sometimes, when your credit score has risen because you have made on-time installments for the past 6 to 12 months as of obtaining your auto loan, you might be eligible for better terms. If the creditor has reported such payouts to the credit reporting agencies, you may now be eligible for lower interest and consider refinancing your auto loan.
When you’re unable to make payments. Refinancing to prolong the term of your loan can decrease your monthly car payment. Prolonging the loan length is one way to do that and sometimes you can even get a lower interest rate as well. Even though you might be paying your loan for a longer period of time, it’s a better alternative than defaulting on the loan or having missed payments.
When Is The Most Beneficial Time To Refinance Auto Loan?
A few borrowers will refinance your auto loan as soon as six months after your initial loan is taken out. If you were not aware of lower rates and accepted a really high rate from the start, it might be worth it to start shopping with companies that offer auto loan refinancing as soon as six months into your loan.
However, if your credit score has lowered or you might have some delinquent payments since you started your original loan, it might be harder to get approved for a refinanced loan. Even if you have had your credit score lowered though, there are some lenders that will help people with troubled credit, so the good news is that you can still try to get approved. Usually, the company you are applying with can let you know ahead of time if you will be a good candidate.
Who Should I Refinance My Loan With?
Sometimes but not often, the same lender that you originated your loan will be willing to offer you better terms. But many times, they won’t.
Small credit unions typically have the best rate, so shopping around with your local credit unions can be a good route but it can be very time-consuming. There are other ways that you can save you time as well.
Our recommendation would be to shop with a company dedicated to refinancing. Refinance companies like RateGenius can usually help you save time, guide you through the process and shop with many lenders, including credit unions, to get you the best rate and reduce the number of calls and inquiries on your credit report in the process.
Is It Possible To Get The Money Refunded When Refinancing A Car Loan?
If the value of your car exceeds the amount owed on it, a few lenders are willing to offer the difference with something known as a cash-out refinancing option. This is a great option for people that have paid off a lot of their loans and want to get some extra cash in the process.
Conclusion
Auto refinancing is a great option for everyone to explore if they have a loan and as early as six months after they get their original loan. If you are not sure if you qualify, it does not hurt to ask to see if you pre-qualify. Auto loan refinancing can help you change your loan terms to either reduce your interest rate or lower your payments. If you have a car loan and are interested in refinancing it, check with your current lender, local credit union or reach out to a loan refinancing company to help you see if refinancing a car loan is a good option for you.
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