Your car is a valuable and necessary asset. You understood you were acquiring the responsibility of a car loan as well. Maybe something changed and your finances no longer stretch as far as they did when you first bought the vehicle, however.
Lower auto refinance rates are available to qualified borrowers. First you need to understand how auto refinancing works and learn how to obtain an affordable new loan suitable for your budget and needs. Read ahead for a valuable guide on the auto refinance loan process today.
Are you new to auto refinancing? Maybe you understand the fundamental concept but have some initial questions before submitting your applications. The auto refinance process involves numerous steps for both you and potential lenders. The lender’s goal is to earn a profit by refinancing your original auto loan.
Your goal is to save money on long-term interest paid, monthly installment amounts or both.
The process of refinancing a loan is similar to the process involved in obtaining an initial loan. Qualification requirements still exist and do not differ by much from those required when you took out the loan to purchase the vehicle in the first place. A main goal when initially borrowing money to purchase an automobile is to get the lowest possible annual percentage rate (APR) on your loan. That goal remains intact when you refinance a loan but also includes lowering the APR you already have.
APRs for refinance car loans are still offered based on your credit (FICO) score, income and payment history. Your payment history on your current car loan is now taken into account as well, however. A credit history showing all your car loan payments were made on time and in full might help get you a lower APR than expected. The initial lender took a calculated risk when lending you money to purchase an automobile.
The new, auto refinancing lender will see the risk paid off and how both you and the original lending institution benefitted from the deal. This is especially true if the auto refinancing lender was the same institution that also funded your original car loan.
Your automobile is still used as collateral for your refinanced vehicle loan. If you default on payments the lender has the right to repossess the vehicle. All refinance loans are pursued by borrowers to reduce monthly payment amounts, save money on interest and create financial breathing room. How significantly any of those reasons carries more weight than the others depends on your unique personal situation.
Auto refinance loan rates are still impacted by fluctuations in the financial markets. This means the lowest APRs available for your refinance might not be much lower (or lower at all) than the APR you are currently paying. For this and many other reasons, certain things are essential to know before submitting an auto refinance loan application.