If you want a lower monthly payment on your auto loan, and possibly a better interest rate, you may be able to refinance your car. Just make sure that the timing is right. It could pay to refinance if your credit score has improved since you took out the original loan.
How to Refinance a Car
Refinancing is when you pay off your current loan and replace it with a new one to get a lower monthly payment and/or better interest rate. In order to refinance your vehicle, you need to make sure you follow these five steps:
- Check your credit – Know where your credit stands and what’s on your credit reports. You can get a free copy of your report every 12 months from each of the three major credit bureaus: Experian, Equifax, and TransUnion.
- Calculate – Calculate the monthly payment you can afford using your budget and online tools like auto loan calculators.
- Shop around for your best deal – Although you can refinance with your current lender, we recommend you shop around for your best interest rate. Make sure you rate shop within a 14-day time period to avoid multiple hard inquiries.
- Contact your current lender – Make sure you request a 10-day payoff amount from your current lender.
- Gather documents – Make sure you have all required documents including proof of income, a valid driver’s license, the title to the car, and any other information required by your new lender.
When Refinancing Makes Sense
There are good times and bad times to refinance a vehicle. But there are four instances where refinancing makes the most sense:
- Your credit score has improved – If you started out with bad credit and a higher than average interest rate, you may be able to refinance for a better rate if your credit score has improved.
- Your financial status changed – If you took a pay cut or are having financial struggles, you may be able to refinance and extend the loan term to make the monthly payment more affordable.
- You need to add or remove a cosigner – If you have a cosigner you no longer need, or want to add a cosigner to qualify for a lower interest rate, refinancing is a great way to do this.
- Interest rates are lower – Although interest rates are currently rising, it’s possible they could go down. If the interest rate has dropped from the time you financed your car, you may want to consider refinancing to get a better rate.
When Buying a Car Makes the Most Sense
If your current vehicle isn't safe or reliable, it may be time to replace it with a newer model. But if you have bad credit, you may be putting off your purchase until your credit is better. However, at Auto Credit Express, we don’t think that you should have to risk your safety. You may be able to get the car you need now, and we can help.
For no charge, we can match you with a dealership in your area that specializes in helping borrowers with less than perfect credit. Our process is quick and hassle-free, and there’s no pressure to purchase anything. Go ahead and fill out our simple and secure online auto loan request form to get started today!