How to Refinance a Car Loan

Signing Finance Documents for Car

We have a lot of Bellaire drivers ask us, “How do you refinance a car loan?” Finding the best way to refinance your car loan can vary depending on your situation and what’s available to you, but Serra Traverse City is here with all of the steps you need to be aware of when considering refinancing your current car loan. Read on below to learn what to know when refinancing your car, and check out our other great car buying tips!

How Do You Refinance a Car Loan?

Many Kalkaska drivers can benefit from refinancing an auto loan once they’ve paid off enough of their current loan and have been consistent with loan payments. Refinancing your current auto loan means you’ll be paying less interest every month, saving you money and lowering the total interest amount owed on your car loan.

When you’re ready to begin the refinancing process, you’ll need to keep in mind what to know when refinancing your car. Be sure to review your car loan information and understand your current monthly payments and interest rate. You can generally look this information up online or on an app through your lender, or you can call your lender. Once you have this information, you can begin the process:

  • Know Your Credit Score: There are multiple ways to learn your credit score and different sites you can utilize. If you’ve been paying all of your bills on time since purchasing your vehicle (including things like credit card repayments), it’s very likely that your credit score has improved since your initial auto loan. Paying on time proves to lenders that you’re reliable, meaning you’ll likely get a better interest rate on your car loan once you apply.
  • Apply for Refinancing: Apply to several automotive refinance companies so that you have multiple offers to later evaluate. Just keep in mind that you don’t want to apply to too many potential lenders, and you don’t want to apply sporadically. Keep a needle-sharp application window, and apply to all your chosen refinance companies within 14 days. Applying for a lower interest rate will require hard inquiries on your credit score. And hard inquiries funnily enough will generally temporarily lower your credit score, staying on your credit score for around two years or so. Your credit score should generally bounce back after two or so years when those hard inquiries drop off. And if you’ve been consistently paying off your new, lowered monthly payments on time, your credit score should most likely improve even more than when you applied for refinancing!
  • Evaluate Your Offers: Take your time. Compare every offer and determine which works best for you and your situation. If you have a general idea of the interest rates you’re looking for or want to play around with some numbers, you can utilize our monthly payment calculator.
  • Decide on a Loan Term: Different lenders will have different loan terms depending on many factors– like how old your vehicle is, how much is left on the loan, and your current credit score. Some lenders have longer loan terms, and some lenders have shorter ones. Before you make a final decision, take the time to go over each option. For example, you may have a great on-paper offer that lowers your interest rate by 2%, but the terms may require that you agree to paying off a lump sum of $1,000 on that auto loan beforehand. That may not work out for you depending on your situation and may not be the best option. Always take your time.

What to Know When Refinancing Your Car

Always keep these things in mind when you’re thinking about refinancing your vehicle:

  • Consider Any Potential Fees: Check your original car loan for any potential fees associated with paying off your vehicle early. If you find that there are fees associated with an early payoff, it may not be the best option to reapply.
  • See How Much Your Car’s Worth: Owing more money on your car than what it’s worth means it can be harder for you to be approved for auto financing. Depending on the situation, you may not want to apply for refinancing.
  • Consider Your Vehicle’s Age: Older vehicles with major depreciation aren’t always approved for refinancing by auto lenders.

If you’re confused about any of these situations or don’t know if they apply to you, our financing center can help you get the advice you need!

Contact Serra Traverse City for More Auto Financing Information!

Kalkaska drivers, don’t hesitate! Contact us online or call us at 231-947-9000 today to learn everything you need to know about financing and refinancing your vehicle. At Serra Traverse City, our staff is standing by and ready to help.

 

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