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Before refinancing a car, you should do a little research to see if interest rates currently being offered on car loans are indeed lower than the interest rate on your current loan. You should be aware that car loan interest rates advertised by lenders are usually for new car purchases, so you will need to dig a little deeper to find out what the refinancing interest rate is. If the interest rates are lower, you should then compare your current balance against the actual value of your car to make sure that the amount you owe does not exceed the value of the car. You can do this using a car value website such as KBB.com.
When you choose your lender you should look not only at the interest rate offered, but also make sure there are no application fees, prepayment penalties, or any other fees which will make the loan undesirable. After you apply and receive an approval you will either need to pay off your existing loan from a check issued by the new lender, or instead simply give the information to the new lender who will in turn pay the loan off for you. The transfer of the car's title should automatically be sent from the previous lender to the new lender, and when that happens the refinance is complete.
If you have been working to improve your credit score, it may be time to consider refinancing your current auto loan. When you first obtained your auto loan, you may have received a high interest rate from a lender that was willing to take a chance with you, even though your credit history was blemished. If hard work and consistent payments have started to raise your credit score, it may be time to secure a new auto loan with a lower interest rate. Consider it a way to reward yourself for all the hard work you have done in the past few years with getting your credit in order and improving your rating. You will find that an auto refinance may result in a lower interest rate, and may give you a lower monthly payment, too. You might even be able to get your car loan paid off faster after refinancing, than if you had kept the loan with the original lender. You certainly deserve a better loan if you have spent time meticulously improving your credit. You've earned it!
Applying for auto refinancing is not complicated at all. The process involves a quick application, which can be done online or over the phone, and usually you'll have a response within minutes.
When you apply for auto refinancing, be sure to have your current contact information and employment status available, in addition to the amount of money you need to refinance your current loan. You don't need the exact payoff balance of the vehicle when you apply, but be as accurate as possible in order to streamline the loan process.
For the quickest turnaround on your loan application, provide accurate and thorough information. This will enable the loan representatives to process your application faster. Be aware though that most lenders do not refinance their own loans.
When you are in the middle of trying to get approved for an auto loan refinance, you may find yourself corresponding with loan officers via e-mail. Consequently, it may not seem odd if you receive an e-mail or a pop-up window from someone asking you to verify personal information in order to go forward with a loan or verify your application. The problem with this, however, is that reputable lenders rarely ask for personal information via e-mail, and it is unheard of for lenders to use pop-up windows to obtain personal information. Instead of replying to these e-mails of pop-up windows, you should contact the lender directly using the phone number supplied on their website. Otherwise you may find yourself a victim of phishing, which is a method used by identity thieves to obtain personal information from people by pretending to represent legitimate companies. Never respond to an e-mail or pop-up which seems unusual to you. Always contact the lender using the methods you have already used previously, and keep your guard up.
Similar to a home equity loan, a cash-out refinance on a car "cashes out" any equity in the car when a refinance is done and the extra money goes to the borrower to use as he or she pleases. This type of loan works well for people who find themselves needing some extra cash while also owing much less on their car than what it is worth. The new loan is written for the full value price of the car.
For example, if a person has a car which is worth fifteen thousand dollars but they only owe nine thousand dollars on the loan, the person can refinance for the full fifteen thousand dollars and walk away from the transaction with six thousand dollars to spend. Not every lender will do this type of car refinance, and it is generally not advised by credit experts to cash out on car equity for frivolous spending or extra cash. On the other hand, this is a viable option for someone who needs a large amount of money unexpectedly and happens to have auto equity available. People who have paid-off cars can use this type of loan as well, and get a lower interest rate than if they had used a personal loan for the money.
Interest rates for refinancing are usually higher than interest rates for the purchase of a car, and for this reason you need to make sure that you pay special attention to the refinance interest rate when you apply for a loan. You may see an advertisement from a lender which states a low interest rate for auto loans, but upon further scrutiny you may find that this rate is only for the purchase of a new car, and not for the refinance of a vehicle you already have. Although you may have to do a little searching to find the actual interest rate offered for refinance loans, you should also be aware that these auto refinance rates may only be for people with good credit.
If your credit has some blemishes on it then you will either be offered a higher interest rate or you will be turned down for the loan. Refinancing an auto loan is a great idea if you are able to get a lower interest rate, but don't be lured in by low interest rates advertised which won't even apply to your situation.
People usually refinance their car loans in an attempt to get a lower interest rate, but there are other instances for refinancing. Legal action, such as a divorce, may lead to a refinance because a loan which was once jointly owned by a couple will be turned over to only one person, resulting in the need to get the other person's name off the loan. Unfortunately, not all people in this and similar situations have good credit, and finding a lender for bad credit auto refinancing can be difficult.
When you apply for a refinance with bad credit you can expect to encounter high interest rates, and you may actually wind up refinancing into a higher interest rate than your current loan if your credit has gone downhill since you obtained the original loan. It is important to research current auto refinancing loan rates before applying, and if possible you should apply with a lender that you already do business with – such as your bank or credit union – as long as you have always made timely payments to the lender. Your bank or credit union may be able to overlook your current credit score and give you some leeway based on your financial history with them.
|Sheri Ann Richerson|