If you’re considering a car loan refinance, it’s probably a good idea to shop around for the best deal. Refinancing can be relatively painless, and many lenders will decide whether or not to approve you in less than an hour.
1. Gather Documents
You will need certain documents to apply for a car refinancing loan. The first will be your pay stubs from your current loan. Be sure it includes information such as the remaining balance, interest rate, monthly payment, and loan terms.
Contact your lender’s customer service department if you can’t find your contract. They can provide you with the necessary information and even send you a contract copy. You will also need to provide the refinance lender with your driver’s license and pay stubs from your current employer. Also, you should check to make sure that there are no pre-payment penalties.
2. Check Your Credit
If you’ve made all of your car loan payments on time, you might be able to refinance your car loan with great terms. If your credit score has improved since you obtained your original loan, you may be able to lower your interest rate.
If you cannot keep up with all of your financial obligations to date, you might have trouble refinancing your car. You can check your credit report to see if you have any problems with late payments. However, this type of research won’t affect your credit score. Since each of us has a different credit score, the score that we get won’t give you an accurate idea of the interest rate on a new loan.
3. Apply For the Refinance Loan
Before starting the process, make sure that you thoroughly compare multiple offers from different lenders. Doing so will allow you to find the best deal and lower your interest rate.
One thing to note: If you’re planning on applying for a car loan refinance, make sure that you submit all of your documents to all potential lenders within 14 days. This will minimize the impact of the query on your credit score.
4. Run the Numbers
According to Lantern by SoFi, “Checking your auto refinancing rates comes with no application fee or obligation. It won’t affect your credit if you choose not to go forward.”
Enter all of the details you need to know about your current loan in an auto loan refinance calculator. It will estimate how long it will take you to pay off the loan and the amount of money that’s left to be paid.
5. Evaluate Loan Terms
If you choose to refinance, you may decide to leave your loan term length the same. This can be beneficial in numerous ways. One benefit is that you will be paying off the loan as quickly as possible. Doing so will allow you to lower the interest rate and make the loan more affordable.
If you’re having difficulty meeting your financial obligations and need a little financial breathing room, a longer loan term can be a great option. It can lower your monthly payments and free up some of your funds for other debts.
After completing the application, you will be sent the loan documents and will be able to respond to the lender’s requests. You’ll then be sent a new loan document that will allow you to start the process of refinancing. Once the new loan is created, your previous loan will get paid off, and you’ll start making payments to the new lender at a lower rate.
Disclaimer: MoneyMagpie is not a licensed financial advisor and therefore information found here including opinions, commentary, suggestions or strategies are for informational, entertainment or educational purposes only. This should not be considered as financial advice. Anyone thinking of investing should conduct their own due diligence.