Shopping for a cheaper auto loan — or refinancing your existing car loan — can save you money and be very easy. Applying for a loan to refinancing car loan often takes less time than an hour, and many lenders promise to approve you within minutes.
A variety of circumstances can make refinancing an auto loan a good idea. A good example is if your credit rating has been improving recently. This could help you to reduce your monthly payment and your interest rate. If you have difficulty paying your monthly repayments, you may be able to reduce the time on your loan.
Here’s How You Can Refinance Your Auto Loan
Look at the latest payment stub for your current auto-loan and make sure that you are aware of the following:
- Your current monthly payments and the remaining balance.
- The loan term, which is commonly referred to as the loan term, refers to the time required to repay the loan.
- The interest rate which you’re currently paying.
- Contact the customer service number for any questions.
Take out your original loan agreement and check that there are no prepayment penalty clauses. Don’t worry if it’s not there. The customer service department at the lender can provide you with the information you require or even send you a copy of it.
For loan applications to be approved, you’ll need the following items:
- Your driver’s license.
- The vehicle identification numbers of your vehicle.
- Your current employer may provide pay stubs.
- Your Social Security number.
- Your creditworthiness should be evaluated.
If your payments have been made on time for at most one year, your credit score is likely to be better, and you might qualify for a refinance.
That’s only true, however, if you also keep your financial obligations up-to-date. The numbers are proof, so you need to see where you stand.
To compare interest rates and get the best deal, you should apply to many car loan lenders. Not all lenders will require that you refinance your auto loan. You will quickly be able to determine if your application qualifies for a lower interest rate.
A word of caution. Make sure that you submit all loan requests within the specified 14-day period. Similar queries during this period are commonly grouped together. It will cause a small drop in your credit score, approximately five points.
Run the Numbers
The auto loans refinance calculator will allow you to first enter information about your current loan. You will need to enter the original loan amount and your interest rate. Also, you’ll need to specify the length of your loan in months. Next, enter the remaining amount due and the length of the remaining loan term.
Next, enter the term of the loan and the interest rates you are expecting to receive. You will see the new, lower monthly payment and how much savings you will make over the life of the loan.
Evaluate Loan Terms
If you are looking to refinance your loan, you have the option of extending it or considering these options:
Reduce the time it takes to repay the loan. This will help you save money by allowing you to pay lower interest over the loan’s lifetime.
Lower monthly payment with a longer loan. This is an option if you have a tight budget and need to make smaller payments. This is not the best option, as you will end up paying more in interest. It is better than missing payments that could damage your credit record.