Are you looking to refinance your car loan? If so, you’re in luck! In this blog post, we will walk you through the entire process step-by-step. We will cover everything from how to find the best rates to how to prepare for your closing appointment. So whether you’re a first-time borrower or you’re just looking for a better deal on your current loan, this post has everything you need!
How to Refinance My Car Loan Table of Contents
What is Refinancing a Car Loan?
Refinancing a car loan simply means taking out a new loan to pay off your existing car loan. This can be done for a number of reasons, such as securing a lower interest rate, extending the term of the loan, or both.
How Do I Refinance My Car Loan?
Refinancing your car loan can save you money each month and over the life of the loan. It’s a great way to lower your monthly payments and pay off your car loan faster. Here’s how to refinance your car loan:
First, shop around for the best rates. Check with your current lender, local banks, and online lenders to see who offers the best rates. Be sure to compare rates and terms before you decide on a new lender.
Next, get pre-approved for a new loan. This will give you an idea of how much money you can qualify for and what interest rate you’ll be paying. Once you’ve found a lender that meets your needs, it’s time to apply for financing.
When you’re ready to apply, you’ll need to submit a loan application. Be sure to include all the necessary information, such as your employment history, income, and debts. Once your application is complete, the lender will review it and make a decision.
If you’re approved for financing, the next step is to sign the loan documents. Be sure to read over them carefully before you sign anything. Once you’ve signed the paperwork, the loan process is complete!
Why Should I Refinance a Car Loan?
There are two main reasons why people refinance their car loans: to secure a lower interest rate or to extend the term of the loan.
A lower interest rate can save you money in the long run by reducing how much interest you pay on the total amount of your loan. If you originally financed your car for 60 months (five years) at an annual percentage rate (APR) of 15%, you’d end up paying $4500 in interest over the life of the loan. But if you refinance to a new 60-month loan at an APR of 12%, you’ll only pay $3600 in interest – that’s a savings of $900.
Extending the term of your loan can also save you money on interest, although it will likely increase your monthly payments. For example, let’s say you currently have a 48-month car loan with an APR of 14%. Your monthly payment is $400 and you still have two years left to pay off the loan. If you refinance to a new 60-month loan at the same APR, your monthly payment would drop to $350.
Of course, there are other factors to consider before refinancing your car loan. These include the length of time you’ve already been paying on your current loan, how much equity you have in your car, and your credit score.
When Should I Refinance My Car Loan?
As we mentioned above, one of the main reasons people refinance their car loans is to secure a lower interest rate.
If rates have dropped since you originally financed your car, it could make sense to refinance and save money on interest over the life of the loan. For example, let’s say you financed your car four years ago at an interest rate of 12%.
Now, rates have dropped and you’re able to secure a loan at six percent.
If you refinance and extend the life of the loan to five or even seven years, you’ll still end up paying less in interest than if you kept your original loan.
Of course, this only makes sense if you can afford the higher monthly payments that come with a longer loan term.
Another reason to refinance your car loan is if you’ve improved your credit score since taking out the original loan.
A higher credit score means better interest rates, so refinancing could help you save money on interest even if rates haven’t changed much since you first financed your car.
You might also want to refinance your car loan if you’re struggling to make your monthly payments.
By extending the life of the loan, you can lower your monthly payment and make it more affordable.
Just be aware that this will likely mean paying more in interest over the long run.
If you’re considering refinancing your car loan, be sure to compare offers from multiple lenders to find the best rates and terms. And remember, when it comes to auto loans, longer isn’t always better – a shorter loan term will usually save you money in interest, even with a slightly higher interest rate.
What Fees Come With Refinancing a Car Loan?
Refinancing a car loan is not free. There are several fees associated with the process. The most common fee is the application fee. This is a one-time charge that is paid to the lender when you first apply for the loan.
Other fees may include the origination fee, appraisal fee, and closing costs.
These fees can add up, so it’s important to shop around and compare rates before refinancing your car loan.
Can I Refinance My Car Loan Online?
The answer is yes! You can refinance your car loan online through a number of different lenders. The process is simple and can be done in just a few minutes.
Here’s how to refinance your car loan online:
First, you’ll need to find a lender that offers car loan refinancing. There are many different lenders out there, so be sure to shop around and compare rates.
Once you’ve found a lender, you’ll need to fill out an application. This will include information about your current loan, as well as your personal information.
Once you’ve submitted your application, the lender will review it and make a decision. If approved, you’ll be able to choose a new loan term and rate.
Once you’ve chosen your new loan, the lender will pay off your old loan and you’ll start making payments on your new one. It’s that simple!
Refinancing your car loan can save you money each month, so it’s definitely worth considering if you’re looking for ways to lower your monthly expenses.
How Soon Can I Refinance My Car?
You may be able to refinance your car loan as soon as you have paid off a significant portion of the original loan. In general, it’s best to wait until you’ve built up some equity in the vehicle before attempting to refinance the loan. This will give you more options and potentially lower interest rates.
How Much Can I Save by Refinancing My Car Loan?
The amount you can save by refinancing your car loan depends on a number of factors, including the interest rate on your current loan, the interest rate on a new loan, and the length of time left on your current loan. In general, you can expect to save money if you can get a lower interest rate or shorten the term of your loan.
Does Refinancing Hurt Your Credit?
Refinancing a car loan does require a hard inquiry on your credit report, which can temporarily ding your score. However, if you shop around for the best refinance rate within a 14- to 45-day period, the impact on your credit score will be minimal. In fact, multiple inquiries for the same type of loan within this window will only count as one hard inquiry.
What’s more, if you have good or excellent credit (a score above 670), you may be able to qualify for 0% APR financing. This means you could save substantially on interest payments and pay off your debt faster. A shorter loan term will also help reduce the total amount of interest you pay over the life of the loan.
Is Refinancing a Car Worth It?
The answer to this question depends on many factors, including how much you owe on your current loan, the interest rate of your new loan, and how long you plan to keep your car.
If you can secure a lower interest rate and you have equity in your car, refinancing may be a good option for you. However, if you are upside down on your loan (meaning you owe more than the car is worth), refinancing may not be an option.
There are a few things to consider before refinancing your car loan:
- How much do I owe on my current loan?
- What is the interest rate of my new loan?
- How long do I plan to keep my car?
- Do I have equity in my car?
Do You Need a Down Payment to Refinance a Car?
Most lenders require a down payment to refinance a car loan. The amount you’ll need to put down varies by lender, but it could be as high as 20% of the loan value.
However, there are some lenders that offer no-money-down refinancing options. If you’re looking to lower your monthly payments and don’t have extra cash on hand for a down payment, this could be a good option for you.
Keep in mind that you may end up paying more interest over the life of the loan if you choose a no-money-down option.
How to Refinance a Car Loan With Bad Credit?
If you have bad credit, you may still be able to refinance your car loan. Here are a few options to consider:
Work With a Cosigner
If you can find someone with good credit who is willing to cosign your loan, this may help you qualify for a better interest rate. Just make sure that you’re prepared to make all the payments on time, as late payments will reflect negatively on both your credit reports.
Look for Lenders That Specialize in Bad Credit
There are some lenders out there who specialize in working with borrowers with bad credit. They may be more likely to approve your loan and offer you a competitive interest rate.
Improve Your Credit Score
If you can improve your credit score, you may be able to qualify for a better interest rate. This will take time and effort, but it could save you money in the long run.
Can I Refinance My Car With the Same Lender?
The answer to this question is maybe. It depends on a few factors, such as how much you owe on your car and the interest rate of your original loan.
If you have equity in your car and your interest rate is high, you may be able to refinance with the same lender.
However, if you don’t have equity or your interest rate is low, it’s unlikely that the same lender will approve your request.
It’s important to shop around and compare offers from different lenders before making a decision. Be sure to read the fine print and understand the terms and conditions of each loan offer.
How Soon Can You Refinance a Car Loan After Purchase?
You can usually refinance a car loan as soon as you have purchased the vehicle. Keep in mind that you will need to have made enough payments on the loan so that the lender sees that you are serious about repaying the debt. You will also need to have built up some equity in the vehicle.
How much equity you need will depend on the lender, but it is typically 20% of the value of the car.
If you owe more than 80% of what the car is worth, you may still be able to refinance, but you may end up having to pay for private mortgage insurance (PMI). This insurance protects the lender in case you default on your loan. The good news is that once you owe less than 80% of the value of your car, you can cancel PMI.
What is PMI On a Car Loan?
If you are upside down on your car loan (meaning you owe more than the car is worth), you may be required to pay for private mortgage insurance, or PMI.
PMI protects the lender in case of default and allows borrowers with less than 20% equity to obtain a loan. The downside is that it can add to your monthly payment.
When Can You Stop Paying PMI On a Car Loan?
You can stop paying PMI when you reach 20% equity in your car. This means that if you owe $15,000 on a car that is worth $20,000, you have reached the 20% mark and can cancel PMI.
To reach this point, you can make extra payments on your loan or wait until your car increases in value.
If you want to cancel PMI sooner, you can refinance your loan and get a new one without the insurance requirement.
How Much Does It Cost to Refinance a Car Loan?
The cost of refinancing a car loan will vary depending on the lender, but there are some fees that are generally charged. These include an application fee, a title search fee, and a lien release fee.
You may also have to pay for an appraisal if your car is worth more than the amount you owe on the loan. The appraisal fee will vary depending on the appraiser and the value of your vehicle.
In addition to these fees, you will also have to pay interest on the new loan. The interest rate will be determined by your credit score and the terms of the loan.
What Are Some Alternatives to Refinancing a Car Loan?
If you’re not able to refinance your car loan, or if it’s not the right option for you, there are a few other options to consider.
You could trade in your car for a new one with a lower interest rate. Or, you could sell your car and use the money towards paying off the loan. Finally, you could simply make extra payments on the loan each month to pay it off more quickly.
Whatever option you choose, be sure to do your research and compare rates before making any decisions.
Refinancing a car loan can save you money each month and help you pay off your debt more quickly. However, it’s not always the best option for everyone.