If you purchased your car during a time when your credit was not in the best condition, or if your car was purchased at a very high percentage rate, you may want to consider an auto refinance. This is a viable solution for getting out of a rate that is too high, and it can help you save money over the life of your loan. Before you start the process, it's good to know what you're getting into to determine whether or not this is a solution worth pursuing.
What exactly is Auto Refinancing
Just like refinancing a home, auto refinancing can work to your advantage. Not only will you get a better rate, but you can also save yourself quite a bit of money. One point lower in your rate can make a huge difference. An auto refinance is simple and quick, and you will not have as many fees to incur as with a home refinance. There are a few ways to determine whether or not an auto refinance should be a consideration:
- Your interest rate is high -- anything at six percent or above should definitely be on your radar.
- Your credit has improved.
- Loan interest rates have dropped.
- You're having financial issues.
- You want to purchase after leasing.
Lowering the payments on your car is a good idea if you have significant changes that have affected your financial situation. If you purchased your car because of an immediate need, this could help you restructure your budget, giving you additional funds for other expenses you may have. To avoid red tape, make sure all of your information is accurate, from your personal documents to any paperwork associated with your current car loan.
When can I refinance?
An auto refinance can occur as soon as six months after you purchase the vehicle. It may be best to wait a year, but it really depends on your situation and the lending agency. The process is very simple, so you will have the approval or denial in a very short time. A good thing about the auto refinance -- these choices are not just for people with high interest rates or financial problems. You may already have a decent rate but have seen lower rates advertised and want to explore your options. If your credit is good and you want a lower payment, it doesn't hurt to pursue a better rate.
Should I use the same company for my auto refinance?
That depends. If your car is currently financed through a major bank, you may want to check the rates being offered at your local credit union. The rates are typically lower, and credit unions are known for working with customers when it comes to refinancing and building credit.
How can I find a good rate for an auto refinance?
Do your homework. Doing the research can get you the information you need and garner great results. There are a few tips on getting a good rate:
- Find a lender offering a low annual percentage rate (APR). Make sure the lender is credible and has a good rating in the lending community.
- Calculate rates with an auto loan refinancing calculator. This will help you determine what you would be saving and your payment at the new rate.
- Check your credit. Knowing whether or not your credit has improved or has deficiencies can make a huge difference in whether or not you are approved. Obtaining a credit report is easy. Don't go in blind. If your credit score is below 600, do not attempt to refinance.
- Do not attempt to refinance more than the current value of the car.
You can save money through an auto refinance if done correctly. The lender, rate and the way you paid your previous car loan all make a difference in whether or not you will be approved. This is a good way to restructure your budget for immediate cost savings. When it comes to saving money, a little can go a long way. Take the time to research your options. It's always worth a try.