You can refinance your car loan. Refinancing offers the opportunity to lower your interest rate and save money over the term of your loan, which lowers your monthly payment. Reasons for wanting to refinance vary, but if rates have dropped or you believe you can obtain a better rate, apply to a lender of your choice.
Benefits
If you took out a loan when rates were high or your credit did not warrant a low rate, you can take advantage of current offers by transferring your loan balance to another lender. To gauge the benefits of a possible refinance, use an auto loan calculator to compare your old loan's term and rate to those of a new one. By shortening your term and lowering your rates, you can save thousands of dollars. You may be able to keep your current level payment for a shorter term, or substantially lower your current level of payment.
Bank Approval Factors
If you just purchased your vehicle, you may not be able to refinance it immediately. Banks determine loan approvals based on loan-to-value ratios. If you purchased your vehicle brand-new, your original lender may have allowed up to 120 percent of the vehicle's MSRP (manufacturer's suggested retail price). When you try to refinance the vehicle, it is considered a used car. If you didn't put money down or failed to negotiate pricing, your loan application may be declined because of lack of equity. 120 percent of a used car's value may not be enough to cover your loan balance, so you may have to offer a down payment.
Approval Options
If you've experienced financial hardship and your credit score has dropped, you can apply for a refinance with a co-signer. A co-signer's information, such as credit and income, is used to secure your loan; your co-signer is equally responsible for your payment. You can take advantage of the same rates and approval terms that your co-signer qualifies for. Also, your car loan must be current in order to apply; you cannot transfer a loan if your payments are past due.
Applying for a Refinance
You can apply for a refinance at any bank you'd like. Be sure to call around to ask about rates and term options. Obtain your current loan's payoff balance from your current lender so you know how much to apply for. The application process is the same as you experienced when you first took out your loan. Expect to offer your credit information. You'll also have to provide your vehicle identification number (VIN), year, make, model and mileage. Once the refinance is approved, your new lender will satisfy your old loan and become the vehicle's new lien holder.
0 comments:
Post a Comment