All posts tagged auto refinancing

Why Auto Loan Refinancing Makes Sense

by Carsurfer Admin on 2013/03/04 in Auto Financing, Uncategorized with Comments Off on Why Auto Loan Refinancing Makes Sense

Consumers have been refinancing their homes for years, keeping track of mortgage rates and seeking out new loans as interest rates fall. That sort of thinking can also be applied to auto loans, a consumer loan that can prove costly when rates are high. Unlike home refinancing that requires mounds of paperwork, auto loan refinancing can usually be completed within mere days.

Auto loan refinancing may make sense for you provided the following has taken place since you took out your loan.

1. Your credit history has strengthened.

Some car shoppers get saddled with high interest rate auto loans because their credit scores were low. Interest rates for car loans are based on a number of factors, with your credit history a huge consideration. If your credit score is now very good or excellent, then you should qualify for a lower interest rate loan. Obtain your credit reports from AnnualCreditReport.com and pay the fee to get your credit score.

2. Loan rates have fallen.

Not only has your credit outlook improved, but loan rates on cars have dropped. Perhaps you got a loan through a financing company and have since joined a credit union. Your new financial institution may offer low-rate refinancing, enabling you to save money.

3. Your finances are better.

Besides an improved credit score and lower interest rates, your personal finances may be better. If that is the case, you may be able to turn that six-year new car loan into a two- or three-year used car loan. You can do this by paying off part of the old loan and refinancing the balance. Your monthly rate may actually come in higher, but you may be able to shave a year or two off of payments, saving you money.

4. Consider your home equity.

Some consumers have discovered that paying off a car loan with their home equity makes sense. Under this arrangement, you take money out of your home and use it to pay off your car. The advantage here is that your monthly payments are lower. The disadvantage is that it may take you several years longer to pay off your car.

Refinance Considerations

Inasmuch that auto refinancing can lower your payments, reduce your interest rates and save you money, there are so matters to consider as you shop for a loan. Keep these in mind as your explore your options.

First, what is your car worth currently? Unlike homes that usually appreciate, cars lose value. Therefore, there is a possibility that you owe more money on your car then it is worth and that means you will have to come up with some cash to make up the difference. Check out Kelley Blue Book for its current value. Contact your lender to find out what the pay off amount is for your current car loan.

Second, some loans have built-in prepayment penalties that must be handled before you can get out of a loan. You may be required to pay back the full amount of the loan plus interest to get out of the original loan despite paying if off ahead of time. Familiarize yourself with your sales contract and its financing clauses.

Another Approach

If you are turned down for refinancing or find that the savings are not as robust as you had hoped, there is another option: paying down your current loan as quickly as possible. Here, you will still make your monthly payments, but you may be able to double up your payments or at least add more payments during the year. Only take this option if you believe that you can afford putting out more money each month in a bid to put your auto loan behind you.
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Jenny Willis is a professional blogger that enjoys providing consumers with personal finance advice. She writes for Purechecks.com, a leading check printing company of designer personal and business checks.

How to Lower the Rate on Your Car Loan

by Carsurfer Admin on 2012/03/01 in Auto Financing with Comments Off on How to Lower the Rate on Your Car Loan

Just as homes can be refinanced, car loans can also be refinanced. The financing is different, however, as home loans extend for many years and houses usually appreciate in value. Auto loans are for shorter terms and all cars depreciate in value except for rare classics. Thus, lenders treat these loans differently, basing financing on a number of factors including future value.

If your car loan rate was high, then now can be a good time to refinance. You’ll need to keep a few things in mind as you seek refinancing, by taking the following steps:

1. Know your credit rating — You won’t receive car refinancing if you are out of work or your income is not sufficient to repay the loan. You also need good credit with consumer credit bureau Experian noting that a score of at least 700 “reflects good credit management.” Experian also notes that a score below 598 means that you have bad credit. Thus, a score from 598 on up means your credit is at least okay. Visit MyFico.com to learn what your credit score is. If your score is high, then seek refinancing. If it is low, then keep your current loan.

2. Talk with your current lender — You may be able to get your current lender to refinance your loan, saving you the necessity of having to apply for a loan with a new lender. Your present lender will need several things from you including one or more recent pay stubs, a W-2 form and possibly your most recent tax filling. You may be granted a lower rate if your credit, your job situation or both improved dramatically since you got your loan. If your credit was bad and you received financing, then you may be dealing with a lender that specializes in sub-prime loans. This means that you’d do better to seek refinancing elsewhere.

3. Shop around — Most lenders prefer to work with people seeking new loans, but there are some that specialize in working with borrowers who have existing loans. You can check with your bank or credit union for loan deals, asking whether loan refinancing is available. You can also find lenders by googling “car loan refinance” and viewing the results. A number of large banks and finance companies are involved in auto loan refinancing, therefore view the offers and select the best one that meets your needs. Limit your application to just one company, however, as your credit score could take a hit if you apply for too many.

4. Resist extending your loan — If you took out a 48-month loan and have 37 months remaining, a lender may be all too willing to give you a new 48-month loan. This is not a good choice for you as you’ll be financing your car longer and you’ll pay a higher rate than a 36-month loan. Besides, lenders know that your car is depreciating and they’ll be certain to protect their own interests as you seek refinancing. Chances are if you shave one or more months off of your future loan, then you’ll come away with payments that are lower and pay less interest going forward.

5. Choose your loan and switch — Once you receive approval for a car refinancing, then quickly get together your paperwork to close on this loan. You may be able to close within 48 hours if your paperwork is in order and the lender is ready to process your loan. Your lender will pay off your current loan and assume title of your car. Only when your new loan has been paid off will you be able to obtain your title.

Final Thoughts

To receive approval for a new loan, a lender may require you to come up with a down payment. That’s because your car is declining in value and the lender may want you to assume more risk in exchange for a better rate on your auto loan.

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Matt Keegan writes as The Article Writer. He operates The Auto Writer car blog, covering industry news, car models and product information.