Making the decision to refinance an auto loan can seem confusing. Where do you even get started? Auto refinancing is the process of obtaining a new auto loan to replace your existing one. Why would you want to do this? For some people, it may help to reduce monthly payments or help them save money. If you’re not happy with making your payment each month, here’s what you should know about refinancing your car.
How Does Auto Refinancing Work?
It is not uncommon for vehicle owners to get into a car loan that’s too expensive for them. Sometimes life circumstances change, and the monthly payment that was affordable no longer is. Other times, you may have accepted a very high-interest rate loan from the dealership because you wanted to make sure you got the car of your dreams. No matter what’s changed, refinancing may provide an opportunity for you to change the circumstances.
Auto refinancing is possible for many people depending on creditworthiness and other factors. Today, there are numerous lenders that may offer a refinance auto loan – with new terms and interest rates – to you. You’ll use the funds from this new loan to pay off the current loan you have, setting yourself up for a new loan that may fit your needs a bit better.
It’s important to know that refinancing is not always the right decision. You may not qualify for refinancing if your car’s worth is low or if you have poor credit. On the other hand, you may qualify for a new loan, but it may not be beneficial to you. For example, you may be unable to obtain an interest rate that’s lower than what you are paying now.
The bottom line is it’s essential to know what you qualify for and what lenders have to offer. To do that, you need to do a bit of homework.
What Are Some of the Potential Benefits of Refinancing an Auto Loan?
There are various reasons to consider refinancing. Every situation is different – you need to determine if the benefits of refinancing are right for your situation and your long-term financial goals. RefiJet offers a variety of auto refinance solutions. Consider a few reasons some borrowers decide to refinance.
Save Money
Sometimes auto refinancing can save you money. One common reason for this occurs when you refinance your existing loan into one with a significantly lower interest rate. The interest rate is the price tag on the loan. The lower it is, the more money you’re saving potentially. Low-interest rates and shorter terms offer some of the best ways to reduce the costs you’ll pay over the lifetime of your loan.
Lower Your Monthly Payment
It is not uncommon for a person to find themselves struggling to make their monthly auto loan payment. Unfortunately, this can happen for many reasons, such as your income drops or the loan has a very high-interest rate, leading to a high monthly payment. You may have thought you could afford that loan payment when you were on the dealership lot, but now in daily life, it’s harder to do. Auto refinancing with a lower interest rate or increasing the loan length may help you get a lower monthly payment. That means you don’t have to worry every time you make a payment on that loan.
Get Out of a Lease
If you are leasing your car, you may want to use auto refinancing to get into an auto loan. That way, you can own your car after you pay off your debt. This is also one way that some people reduce the amount of fees they have to pay by going over their mileage for their lease timeframe. If you have a lease and want to own your car, consider lease buyout refinancing.
Get Cash Out of Your Loan
Auto refinancing can also help you take advantage of the equity in your car. Let’s say you own a car that is currently worth $18,000. You’ve worked to pay down your auto loan. You owe around $8,000 on it. That means you have about $10,000 worth of equity in the car. You may be able to refinance your current auto loan and borrow more against your car. Instead of owning $8,000, you may owe $12,000 now. You can then use those funds for anything you want or need. Learn more about getting a refinance to get cashback from the equity in your vehicle.
There are many reasons to consider auto refinancing. The question is, does it make sense in your situation?
Is Auto Loan Refinancing a Good Decision for You?
To determine this, you need to consider your financial goals. Here are some things to keep in mind.
- Are your monthly payments too high each month?
- Are you overpaying in interest rates due to a high-interest rate?
- Has your credit score increased since you obtained your loan, making it likely you’ll qualify for a lower interest rate?
- Do you want to add or remove a co-borrower from your existing loan?
- Are you considering refinancing so you can add GAP or an Extended Service Warranty on your car?
Determine your financial goals, and then seek out loans that can help you achieve them. At RefiJet, we may be able to help you find loans that fit many of these needs.
What Do You Need to Refinance Your Auto Loan?
Lenders need to have some information to determine what they can do for you. Most lenders gather information about you to assess the level of risk. A borrower who may be a lower risk may qualify for a lower interest rate on their auto loan. On the other hand, a borrower who is a high risk, such as due to poor payment history on their other loans, may qualify for refinancing with a higher rate.
When getting an auto refinance loan from RefiJet, you will be asked to provide some basic information. This information can help lenders determine your credit qualifications. Some of the information needed includes:
- Your identification to verify who you are, such as your driver’s license or other state-issued ID
- Proof of your income, which may include paycheck stubs or a W-2, or proof of other assets you own
- Financial history, which may come in the form of a credit check (don’t worry, at RefiJet, we only do a soft credit pull to determine if you qualify for an auto refinance, so your credit score is not harmed in the process)
- Your vehicle’s information: may include the vehicle’s VIN, the make and model information, and the year of the car, along with how much you owe on it
All of this information helps prospective lenders determine what they can offer to you if anything. At RefiJet, your personal information is always protected and safe with us. Learn more about auto refinance eligibility requirements.
Will Car Loan Refinancing Hurt Your Credit Score?
When it comes to refinancing your car, there’s much to think about. We do only a soft credit pull when you request an auto refinance loan through RefiJet. That means there is no hard inquiry added to your credit report. It also means there is no negative impact on your credit score to see if you qualify for a better auto loan. If we can find you a better auto loan that you qualify for, with your approval, we will then submit your application to one of our lending partners who will then do a full credit check.
Keep in mind that our goal is to help you get into a loan that fits your needs better. For some people, a too high monthly payment puts them at risk for default. That could harm your credit score in the long term. A new loan may help you alleviate some of those high payments and ensure you can make monthly payments.
How Much Is Your Car Worth?
Another factor to consider about auto refinancing is what your car is worth. Lenders are often happy to offer a loan to you if your car is worth at least as much as you wish to borrow on it and you meet other qualifications. It is not usually necessary to obtain an appraisal on the vehicle to refinance. However, the lender will request information about the car, including details about its make and model, age, condition, mileage, and vehicle history. Some of this information is found through third-party organizations.
The key here is that lenders need to be sure the vehicle is worth enough to back up the value of the loan. If you owe more on your car than it is worth, you have an upside-down loan. In this situation, the lender may be unable to provide a loan to you unless you pay down the debt you owe on it.
Common Questions About Auto Refinancing to Consider
It’s a big decision to refinance an auto loan. At RefiJet, we make our team available to you to answer all of your questions. We’re honest. If refinancing may not be the best financial decision for you, we will tell you that. Give us a call to answer any questions you may have.
Here are some common questions you may have about refinancing.
How much can I really save when refinancing my car?
This depends on many factors. Our loan offers can give you some of that information once you start the auto refinance process with RefiJet. It only takes a few minutes to request these loans. Then, you’ll be able to see which loans offer the lowest rates or the lowest monthly payment you may be looking for to refinance. That may provide you with some information about how much you personally can save by refinancing. You can also check out our car refinance calculator.
If I request multiple loans from various lenders, will this hurt my credit score?
Not when you use RefiJet. When you request a loan from us, our technology will gather information about you and then perform a soft credit pull (remember, that doesn’t hurt your credit score). It allows us to find available loans that you pre-qualify for without the need to pull numerous credit reports from various lenders. All of the loan offers we present to you come from our nationwide partnerships with lenders. These lenders know your credit information and are willing to work with you if they offer a loan to you.
Can I add a co-borrower to a loan?
One of the benefits of refinancing is that you may qualify for a lower interest rate if your credit score is better than it was when you first took out your car loan. If you don’t think that’s happened yet, consider adding a co-borrower to your loan. If that person has a good credit score, it may help you qualify for a lower interest rate. You can refinance your auto loan by adding (and removing) a co-borrower if you would like to do so. Learn about auto refinancing during life-changing events such as divorce.
What factors do lenders consider when determining if a person qualifies to refinance?
Lenders take into account numerous factors to determine if they can provide a loan to you and, if so, how much you’ll pay for it. This may include your credit score, debt-to-income ratio, and the value of your car. Lenders typically want to be sure you have the financial means to repay your debt. Learn more about auto refinance eligibility requirements.
How Can RefiJet Help You Get Auto Refinance Loan?
If you are overpaying on your current auto loan, you may be able to refinance into a new loan. RefiJet does the heavy lifting for you. You’ll provide us with some information about you. We’ll find the loan offers that may be available to you from one or more lenders. You can choose from these loan offers if you would like to. There’s no obligation to get this information. If you decide to move forward, closing on your new loan only takes a short amount of time.
RefiJet is committed to providing you with exceptional service. Ask us any questions you have and learn what options may be available in your situation or check out our auto refinance FAQs or videos for more information. It may be easier than you think to get into an auto loan that better fits your needs and goals.
If you think you could benefit from an auto refinance loan, there is no obligation and it does not hurt your credit score to check. Get Started Now.