If you have recently qualified for an auto loan and aren’t too happy with the terms, you may be wondering whether auto refinancing may be a good idea. While the process is fast and easy, it isn’t the only thing determining whether you should go for it.
Here’s everything you need to know about the process of auto refinancing.
Is Auto Refinancing Easy?
Refinancing your car is not a walk in the park, but it also isn’t as inconvenient as it may sound. On the bright side, it puts more money in your pocket and helps reduce your monthly payments boosting your savings on interest over the loan’s terms.
What Do You Need to Make It Worth Your While?
Typically, a history of six to twelve months of on-time payments should be enough to make auto refinancing worth your while. This is because the new rate and terms you land will majorly depend on your credit scores and payment history.
What Documents Do You Require to Refinance Your Car?
For starters, find a pay stub from your existing auto loan and make sure to take note of the following:
- The current interest rate
- The current monthly payment
- The remaining balance
- Amount of time left to pay the loan back
In addition to the mentioned details, you will also need the following items to finish your application:
- Your social security number
- Proof of current employment (in the form of pay stubs)
- The VIN (Vehicle Identification Number) of your vehicle
- Your driver’s license
Evaluate Your Credit
Is it worth it to apply for an auto loan refinance? The very answer to this question relies on how good or bad your credit score is. All you need to do is pull your credit report and check it for all your activities and the score to determine whether there are any problems such as late payments, for instance.
Again, since you’re evaluating your report yourself, it will not have an impact on your score. In a nutshell, your credit score will give you a rough idea of what to expect in terms of your new interest rate.
It’s better to apply to a number of auto loan refinance companies as it will enable you to compare the rates they’re offering and take your pick. Also, make sure to understand what each lender requires since their needs can vary to a great extent.
Since the application process is often free of cost, it may help you learn whether you qualify for a lower interest rate or not.
However, here’s a rule of thumb to keep in mind: submit your loan applications within a two-week period. This is because, during this time, similar queries are grouped together and treated as one, resulting in a lower impact on your credit score.
In the end, auto refinancing is a fairly simple process. However, the circumstances that lead to it should be evaluated with utmost responsibility. If you do manage to reach the conclusion that auto refinancing is, in fact, in your best interests, then go ahead and apply!