Refinancing your car loan may be the best option if you received a high-interest rate.
A high-interest rate is usually indicative of some credit problems. While obtaining a rate that is a few percentage points higher than current trends may not seem like the best deal, it may cost you an addition $30-50 a month.
To improve your credit, save money on your auto loan, and then consider refinancing for a lower rate.
What is a Refinance?
A refinance creates a new loan, which replaces the current loan. You may incur a title transfer fee and a prepayment penalty fee. Before agreeing to refinance, carefully consider the pros and cons. If the savings are low, refinancing may not be the best option.
What is Car Refinancing?
When you’re discontented with your current loan, then you can refinance your car loan with improved lower monthly payments and interest rates. In refinancing, a new lender comes into the picture, pays off your current car loan, and the title of the car will be transferred to the new lender. Now you’ll have to make payments to the new lender at improved rates.
The great news is that there is no waiting period to refinance your car loan, you can do it at any period during your loan term. Therefore, do not worry about the possibility of your current lender charging you high penalties. But just be cautious of any pre-payment agreement, because if there is any, then only in that case you’ll have to pay the penalty.
Why Do You need to Refinance Your Car Loan?
When you avail auto loan, the interest rates may be higher than the current rates. It does not make any sense paying higher when you can take advantage of paying less. Also, it must have also been a possibility that your credit history affected your interest rates in the past, you can always refinance your loan and lower those high rates.
Why Is It Important That You Refinance Your Auto Loan At The Earliest?
Auto loans are structured in a way that you’ll have to pay more interest in the first months of the loan. If you refinance your loan earlier then you can save more. Also, if you refinance early when your car is new and has more value, then getting a new loan is easy. Therefore, it’s always beneficial to refinance your auto loan as quickly as possible when you see an opportunity.
Is Refinancing Expensive?
Refinancing your auto loan is not expensive. You just need to pay Standard Transfer of Lien Holder Fees (which is usually $5-10) and State Re-Registration Fees ($5-75). Also when you consider the amount of money, you’ll be saving by refinancing your current loan these small fees will look irrelevant to you.
When you decide to refinance your loan, ensure you understand what you’re getting into and how much you’ll save. When the lender offers you with loan terms and new interest rates, you can make use of the Loan Calculator that is available to know how much you can save.
By using the Auto Loan Calculator, you can try a different combination of interest rates and terms and see how they’ll influence your monthly payments.
When you’re in the process of getting all things right for the new loan, do not forget to make your payment for the current month. Keep in mind that your new lender has to pay off your loan and you’ll still be under the obligation of the contract made with the old lender. But once you receive an acknowledgment letter from your new lender, then you can start making payments.
When it comes to refinancing you may be thinking about the effect, it would have on your credit score. It may sometimes happen that it reduces your score but if you happen to grab a good refinancing deal, then it will not only offset the loss but improve your score.
Think about long-term goals and how much money you’ll be saving over the term of your loan. Therefore, it’s a wise decision to refinance your car. Do not miss the opportunity.
When to Refinance?
The best time to refinance your auto loan is when you have been paying on the existing loan for at least a year and when your credit score has improved and. After applying for a new auto loan, lenders will review your credit. Your credit score is an important factor in deciding the interest rate.
Bad credit applicants must pay higher fees whereas good credit applicants are offered great rates. Before refinancing, check your credit report. If your credit score needs improving, put off refinancing till you find a resolution to the credit issues.
How to Refinance Online?
When refinancing your current auto loan, request a quote from your auto lender. Lenders want to keep you as a current client. If you have established a good payment history, your lender may be willing to refinance your loan, and relinquish some of the fees that accompany a refinance.
While your existing auto loan lender may provide you with a great deal. It is ideal to compare rates with other lenders. The best way to get multiple offers from many auto loan companies is to request an online quote. Submitting a quote through an auto broker is convenient and quick. The time for the reply differs, but you can expect a response within an hour to 24 hours.
After you get quotes, carefully compare the fees and rates of each lender. Choose the lender with the best deal. Submit an official application, and within few days you’ll receive paperwork to sign.
Ensure you read the fine print and be familiar with the terms and conditions that may apply to your new loan before signing it. From there, you can start saving money on your car payments, because you chose to refinance your auto loan.