There are many requirements you need to meet when you want to refinance your auto loan. But it’s not just you that has to qualify, your car has to, as well. If all lender requirements are met, refinancing can be a great way to save money each month.
Why Refinance Your Car Loan?
The only reason to refinance an auto loan is to lower your monthly payment. To do this, you replace your current loan with a new one. There are two options for lowering your monthly payment: qualifying for a lower interest rate or extending the loan term.
Longer loans lower your monthly payment by extending the time you have to pay it off. This may seem like a good idea, but, ultimately, it doesn't save you any money overall because you end up paying more in interest charges as a result of the longer loan term.
A lower interest rate, on the other hand, lowers your monthly payment and saves you money in the long run, even if you keep the same loan term.
Is Bad Credit Refinancing Possible?
Car loan refinancing is usually reserved for people with good credit. However, if you originally took out a bad credit auto loan, it may be possible to refinance if your credit score has improved in the time since you got it.
In these cases, lenders often look at your credit history and how you've been paying on your current car loan over the last year or more. If your payments have been consistently on time and there haven't been any late or missing payments, you're more likely to qualify for refinancing even with a less than ideal credit background.
Meeting Refinancing Requirements
In order to refinance your auto loan, you need to meet a number of qualifications. These are likely to vary from lender to lender, so make sure to ask about them, and get a few quotes before you decide on the best refinancing deal for your situation.
Here are the typical requirements to refinance a car loan:
- Good or improved credit score – You can refinance your auto loan when you have good credit. Or, your credit score needs to have improved if you originally took out a bad credit car loan. Typically, a credit score of 620 and higher is recommended.
- Current on payments – You aren't eligible for refinancing if you're behind on your loan payment.
- Equity in your vehicle – If you're upside down, meaning you have negative equity, you can't refinance. Your car has to be worth as much as, or more than, what you owe on your loan.
- Vehicle age and mileage – Lenders have age and mileage limitations for cars they're willing to refinance, so be sure to ask about specifics up front.
- Loan amount – Lenders have their own loan amount rules. If you owe too much, you may not be able to refinance.
If you think refinancing is the best course of action for you, Auto Credit Express wants to help. By filling out the easy refinancing form, our trusted refinancing partner can get you started on the right foot.
However, if refinancing isn't what you have in mind, or your situation doesn't allow you to qualify, you may want to consider trading in your car for something more affordable. We can help with that, too.
Auto Credit Express works with a nationwide network of special finance dealerships that are signed up with lenders that know how to assist people with less than perfect credit.
Fill out our free auto loan request form, and we'll work to match you with a local dealer. Don't hesitate any longer, click here to get on the way to your next car loan right now!