The prospect of refinancing your car loan is appealing if it can result in a lower interest rate and/or lower monthly payments, allowing you to save money. This is why our team at Auto Credit Express is constantly getting questions on the subject. Take this one we received just last month:
“I am looking to refinance an existing loan, do you do that?”
Auto Credit Express does not refinance car loans because we are not a lender. Our service simply connects car buyers with dealerships that can work with challenging credit situations. This takes the hassle and headache out of trying to find financing if you are dealing with bad credit.
If you are looking to refinance your car loan, you are going to have to go it alone. Luckily, the process of refinancing is typically very straightforward. As long as you qualify and do some prep work, it’s basically as simple as applying for a car loan.
Let’s run through a step-by-step guide of how to refinance a car loan.
Step 1 – Review Your Situation and Gather Information
First and foremost, you need to make sure you can get approved. On top of that, you need to make sure the refinance will accomplish the outcome you desire. For most people, this means securing a lower interest rate. This helps them land a lower monthly payment and save money in interest charges in the long run.
Refinancing options are typically reserved for consumers with good credit. However, it’s sometimes possible to qualify if your credit has improved since the beginning of the original loan, so you need to be in the know when it comes to your credit. You’ll want to order your credit reports and at least one credit score (preferably FICO). If your score is less than perfect, you may want to take some time to improve it before continuing.
Next, make sure you know all relevant information about your vehicle, including the vehicle identification number (VIN), make, model, year, and mileage. It will also be helpful to research its current value.
You will also want to gather information on your current loan. Know the payoff amount, interest rate, loan term, and monthly payment. Your new lender will need this info so they can put together a financing package for you.
Step 2 – Research Lenders
Next, it’s time to check out the refinancing options from several different banks, credit unions and other lenders. Each will have different rules when it comes to car and loan restrictions, so try to identify lenders that can work with your situation.
Many institutions offer free quotes too. You can try to figure out what interest rate you can qualify for with different lenders and search for the lowest one.
Step 3 – Apply
Once you have identified some choices, it’s time to apply. Lenders usually allow you to apply for a refinance for free, and it can typically be done online. Isn’t it great when you don’t have to leave the comfort of your own home?
When applying, expect to need to provide the information about your car and current loan that you gathered in step one, in addition to personal and employment info.
Remember, multiple inquiries for the same type of loan done with a short period of time (typically 14-30 days) will only count against your credit as a single hard inquiry. This allows you to apply with multiple lenders as you rate shop for the lowest APR.