Refinancing your car loan is a good move if you wish to have better loan terms. It’s also a great option if your financial situation has changed recently. It refers to taking on a new loan to pay off your current car loan balance.
Regardless of your reasons to refinance a car loan, it can be challenging if you do not know the procedure. Here are five steps to refinance a car loan
Review Your Existing Loan
Most people are unaware of the APR on their auto loans. It is highly recommended to understand your existing loan’s dynamics well, such as:
- How much interest you’ve been paying
- What your monthly payment is
- What the total loan cost will be upon finishing the entire term
Knowing your current rate is the only way to refinance at a lower rate and save money.
Keep an Eye on Your Credit Score
If you’ve made smart fiscal decisions since securing your original auto loan, your credit score has most likely improved. It’s crucial to have a good credit score for securing a lower rate on a refinance.
Find Out Your Car’s Worth
When thinking about whether to refinance a car loan, the cost of the loan is not the only factor to consider. It’s equally important to know what your car is worth. If your car is newer and you still require a few years to pay it off, you may have a good chance to refinance. On the other hand, if the worth is less than what you owe, you may have a lesser chance of qualifying.
Do Your Homework on the Best Refinancing Rates
Interest rates can vary widely, so look into several credit unions and banks before choosing one. It’s a good idea to start from your bank and go on to compare auto loan rates online.
Do Your Paperwork
Before applying to refinance a car loan, make sure all your documents are ready. Here is what you need:
- Details of your current loan, such as the payoff amount, remaining balance, and interest rate.
- Proof of income
- Proof of insurance
On the whole, refinancing your car loan can have a huge impact on your personal finances. Therefore, now is the right time to consider your refinancing options and compare auto loan rates.