No matter your credit score, you have to meet all the lender requirements if you hope to refinance your car. Though each lender has its own specifics, there are generally a few requirements you should expect when refinancing an existing auto loan.
What are the refinancing requirements? To refinance your car and replace your current auto loan with another, you, your vehicle, and your loan have to fall within certain guidelines according to your lender. Most borrowers refinance with a new lender, but you can check with your current lender too.
- Good or improved credit score. Having good credit, a FICO score of around 670 or better, is required in many cases. However, if you took out a subprime auto loan, you may be considered if your credit score has improved.
- Be current on your loan. Most lenders require your loan to be current and in good standing, with a record of on-time payments. Your loan must be at least one year old, and not be too close to payoff.
- Acceptable loan amount. Lenders each have their own rules about what's an acceptable loan amount. Generally, if you still owe too much, or are close to finishing your loan you may not be able to refinance.
- No negative equity. Your vehicle must have equity or at least break even, meaning you can't be underwater on your loan if you want to refinance.
- Vehicle age and mileage. Your car must fall within the lender's range on acceptable age and mileage. These vary by lender, but most prefer to refinance vehicles that are in good condition.
How does car refinancing work? The goal here is typically to get a smaller monthly payment. To do this, you either have to qualify for a longer loan term or a lower interest rate. The lower interest rate is generally the best choice since it lowers your payments and overall cost to finance. It's most common for borrowers to refinance with a new lender, but you can check with your existing lender to see if they can help you lower your rates.
If you think you meet the refinancing requirements for your car and are looking for a place to start, let us help. Auto Credit Express works with a large network of providers able to help with your refinancing needs. Simply fill out our fast, free, auto loan refinancing request form to get started!