If your credit has improved since taking out an auto loan, you may be considering refinancing. There are two main reasons why you may want to refinance: lower your interest rate, or lower your monthly payment. But where should you go to refinance your car loan? Keep reading to find out.
Step 1: Check Your Credit
Before you look for a lender to refinance a loan, make sure your credit score has improved and your credit reports show accurate information. You can get a free copy of your credit reports every 12 months from the three major credit bureaus: Experian, Equifax, and TransUnion. You can request these by visiting www.annualcreditreport.com. Most lenders look at your FICO score, and if your lending institution offers a free FICO score check, you can use that. If it’s not offered, you can go to myFICO.com and pay a fee to see your FICO credit score and auto-enhanced FICO score, which most car lenders use.
Step 2: Find the Best Lender to Refinance Your Car Loan
From there, you can begin searching for a lender. To refinance your auto loan, you should go to many different lenders to see what they can offer, from banks to credit unions to online lenders.
It’s possible to refinance with your current lender if you’ve kept up with your monthly payment and are in good standing with them. If they turn you down, or don’t offer you a decent deal, it’s time to rate shop and look for a different lender. Even if the deal seems okay, you should still rate shop to see what else is out there.
When you rate shop, you typically have at least 14 days to look around and make a decision. Make sure you don’t go over the time frame, as you don’t want multiple hard inquiries affecting your credit score. A good tip is to get quotes from at least three different lenders. This way, you can compare offers and get a better idea of which deal is truly the best fit for you.
When Should I Refinance My Car Loan?
If you’re not sure of the best time to refinance your car loan, consider these three things:
- Has your credit score improved?
- Have at least two years passed since you took out the original loan?
- Are you struggling to afford the monthly payment?
If you said yes to any of these three things, then it’s probably a good idea to try and refinance. When you refinance, you want to look for a better interest rate. A better interest rate lowers your monthly payment and helps you save money in interest charges in the long run.
If your credit hasn’t improved much, but you’re struggling to keep up with the monthly payment, you can still consider refinancing. Refinancing an auto loan with bad credit isn’t impossible, but it can be a challenge getting approved.
In this case, you may be able to get a lower interest rate, but, realistically, you should be looking to extend the loan term so that the monthly payments are more affordable.
The Bottom Line
Whether or not you should refinance your car loan depends on your current financial and credit situation. Make sure you look over your current loan contract and double check your credit score and reports before jumping into the refinancing game.
If refinancing isn’t on your mind right now, but getting an auto loan with bad credit is, know that all hope isn’t lost in finding financing. At Auto Credit Express, we can connect you with a local special finance dealership that knows how to handle unique credit situations. Get started today by filling out our simple and free car loan request form.