What does refinancing?
Refinancing your car loan allows you to pay off an old loan that is higher-priced and replace it with a new lower-priced one. The refinance process is a common practice among owners of homes and vehicles. While it may sound simple and easy enough, there are several factors to consider. And refinancing may not be the best answer for everyone. Let’s take a closer look.
What happens with my existing loan?
When you refinance, your new lender pays off your current loan and replaces it new loan with better terms. Consumers typically look to refinance in order to reduce existing debt, save money, and potentially free up cash for other financial needs or obligations. The process of loan refinancing is dependent on you acquiring a lower interest rate or better payment terms that get you to a lower monthly payment on your mortgage, auto loans, personal loans, or other loan types. Shifting to a lower interest rate is the most common reason people refinance. Interest rates greatly affect your loan payment on mortgages, car loans, student loans, and credit card debt, so grabbing a lower rate when available can often lower your monthly payment.
When you refinance, your new lender pays off your current loan and replaces it new loan with better terms. Consumers typically look to refinance in order to reduce existing debt, save money, and potentially free up cash for other financial needs or obligations.
What is auto refinancing?
Auto refinancing process replaces your current loan balance with a new loan that has better terms. If the loan term is in your favor, auto refinancing can potentially save drivers hundreds, even thousands, of dollars over the life of the loan. A new loan also gives you more control of your finances by lowering your monthly payment. Allowing you the freedom to pay off debt obligations, tackle an emergency expense or add to your savings account.
How does refinancing work?
Once you decide if refinancing is right for you, gather those personal, employment, and existing loan documents that most banks and financial institutions will want to review. Check your credit report to see if your score has improved over time. Some lenders, like Rateworks, offer free quotes that will not impact your credit score. Once you close in on the right deal, and you are confident about qualifying for the new loan, double check the rates, terms, conditions, and fees associated with the new loan. If everything is in order, you can begin the application process.
Considerations for auto refinancing
Banks and other financial institutions provide refinancing options based on your credit history, income, and other factors related to you, your vehicle, or both. If you are approved for a refinance loan, the bank or institution will then set the rate and payment terms. And then, if you are approved, be on the lookout for additional fees. It’s not uncommon for institutions to charge an application fee, an auto retitling fee, a lender fee, or prepayment penalties. RateWorks, on the other hand, creates and manages auto refinancing without the need for a third-party lender. There is no credit threshold required, and we won’t ask for your social security number, or bank records to provide you a quote. That means, in minutes, RateWorks can determine your refinance qualifications and build your new loan. And there are no mystery fees nor loan mark-ups attached to your new deal.
When should you refinance your auto loan?
As we mentioned, refinancing is not a solution for everyone. Here are some advantages to consider before determining if a refinance program is right for you.
Timing is everything. If you bought your car when interest rates were high, refinancing could lower your interest rate and save you hundreds of dollars each month if you don’t extend the terms of your loan.
Check your credit score. Traditional lenders reward higher credit scores. If you originally financed your auto loan with a low score, and your score is now higher, you may be in line for a better interest rate and lower monthly payments when you refinance.
Change the terms. Refinancing with a lower rate can allow you to shorten the payment cycle on your original loan (yet possibly pay the same amount each month) or extend the payment cycle (allowing you lower payments each month for a longer period). It’s great to have options.
Saving money each month is a terrific idea, but first do your homework before deciding if refinancing is right for you. RateWorks is here to help if you have questions or need guidance. To see if refinancing an auto loan is right for you get a free quote today!