You have several options available to you when refinancing your loan. You can ask your lender for lower rates and loan incentives and you can alter your loan term and provide a down payment. Before you apply for a car loan refinance, determine which loan factors you can change to obtain a more affordable loan.
Auto Loan Provider
To refinance your car loan, you can choose whichever lender you'd like. Rates vary for used car loans, so check websites of local and online auto loan providers or credit unions. If you choose a local bank, you may want to choose one with incentives for banking or holding a checking account; most banks require borrowers to open a checking account to initiate a loan. Look for incentives like an automatic monthly payment option; some lenders offer up to a one-point interest rate deduction.
Term
You don't have to apply for the same term that you have left on your auto loan. You can increase your loan term to lower your car payment if necessary. If you can obtain a significantly lower rate than you currently have, you may be able to shorten your loan term and pay the same or less of a monthly payment. Shortening your loan term also results in a decrease in your overall loan payback amount, which is worth consideration if you don't plan to pay off your loan early.
Down Payment
If you have extra money to put toward your refinance, do so to lower your payment and overall loan payback amount. Every $1,000 you offer toward your down payment results in roughly a $20 monthly payment discount per month. Use an auto loan calculator to determine the differences a down payment makes to your monthly payment and loan payback amount. Edmunds.com offers several free calculators. You may find that a several thousand dollar down payment allows you to decrease your term while still providing an affordable payment.
Considerations
Your auto loan provider may approve your loan but restrict your options. If your vehicle's value is less than your requested loan amount, you may not obtain an approval for the amount for which you apply. In this event, your lender will require a down payment. If your credit has suffered since your original loan, you may find that the lender restricts your term or raises your rate, which effects your monthly car payment. Based on your current credit or vehicle value, it may prove beneficial to keep your current loan and refinance at a later date.
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