Auto loan refinancing is not new to many people. But regardless of whether you are new or have used it before, some expert advice is crucial to help you make informed decisions. It doesn’t matter whether you intend to refinance a used or new car; the main objective is always to lower the interest rate or reduce your monthly payments.
The problem is that sometimes people make hurried decisions when financing cars and don’t pay much attention to the interest rates. You must take into account multiple factors before deciding to refinance your auto loan with a particular financial institution.
Here are five tips for refinancing a car loan:
1. Look beyond the big banks
If you are looking for the best rates for car refinancing, then don’t put all your focus on big traditional banks. It would be a great idea to consider other lenders like local credit unions. This is because credit unions are not so much interested in making profits but rather serve their clients.
This is unlike traditional financial institutions, whose main aim is to make money through interest rates. That’s why you should only consider them after considering all other options. But even if you choose to refinance with a traditional bank, shop for one with reasonable rates.
2. Don’t despair if your request is declined
In case your loan application is rejected, don’t give up but instead try to find out why the request was declined and if there is any way to remedy the situation. Maybe it is because you have a huge balance on one of your credit cards that are affecting your credit score. If that’s the case, then paying it off could improve the status of your credit score and increase your chances of getting a loan.
3. Shop around
If your loan application is rejected by one financial institution, it doesn’t mean that all other lenders will follow in the same direction. It is true that most lenders use your credit report to decide whether to issue you a loan or not.
But not all of them strictly use credit scores as a prerequisite of loan disbursement. Some financial institutions are lenient and can issue you a loan even with a bad credit score. That’s why you should shop for different lenders within a short time.
4. Know when it is right to refinance and when it is not
Before you start spending time looking for a financial institution to refinance your auto loan, sit back and determine if refinancing is the best option in relation to your financial situation. If your credit score has positively changed in the past few years or months, then refinancing would be a good option.
5. Reduce the length of your auto loan
According to Lantern by SoFi, “ an auto refi loan can help you minimize the duration of your auto loan. This ultimately means you pay less long term interest, so you’ll end up paying less in the long run.
Auto loan refinancing has many benefits. It can help lower interest rates, reduce monthly payments, improve your credit score, and more. It’s important to do your research to figure out if refinancing is right for you.
Main Photo by Torsten Dettlaff.