When you want to refinance car loan terms and payments, the process involves applying for a new car loan to pay off the existing one. Most automobile loans are secured with the vehicle serving as collateral and the borrower making fixed payments over several years.
According to the online automotive experts at Edmunds, “The most common term currently is for 72 months, with an 84-month loan not too far behind. In fact, nearly 70 percent of new car loans in the first quarter of 2020 were longer than 60 months — an increase of about 29 percentage points in a decade.”
There are a wealth of reasons why refinancing a car loan might be in your best interest. As a local lender, we can help you explore pathways to lower interest rates and the best possible terms.
When people consider reasons to refinance a car loan, they usually have some financial incentive in mind. With money management being largely a logical process, here are a few common reasons why people refinance an auto loan.
While different motivations exist to refinance car loan terms, interest rates, and monthly payments, it’s crucial to get the timing right.
Auto loan refinancing ranks among the more important financial decisions. Although you may be motivated by a wide range of reasons, it’s essential to know when or when not to move forward. Here are some factors to consider when deciding the best time to refinance car loan terms:
If the timing is right to refinance car loan terms, the next step will be finding a suitable lender.
Finding a lender that best serves your automobile refinancing needs does not have to be a complicated process. Many borrowers start by going online to review trending interest rates and terms. You are likely to run across plenty of slick marketing and incentives. Many people also discover hidden and excessive application and processing fees.
What borrowers can genuinely rely on is the customer service of local lenders who live and work in the community. That fact means you will not be treated like another anonymous borrower. Lending to fellow community members continues to be a powerful way of doing business. As the saying goes, “A rising tide lifts all boats.” As a local lender, we can review your credit, down payment, and collateral, and guide you through the loan process.
Refinancing a car loan begins with some due diligence. Start by reviewing the terms of your existing car loan and determine whether there is an early repayment penalty. These can be costly, but not necessarily prohibitive.
There may also be title transfer fees. These vary by state, but keep in mind, that you may need to incur the charge when paying off the car loan at some point. After you have a full grasp of your existing responsibilities and the impact of refinancing, check the current value of the vehicle.
Resources such as the Kelley Blue Book are widely accepted value estimators. If you owe more money on your car than it is worth, you may need to put out a substantial down payment to offset the difference because the automobile serves as loan collateral. It's a good idea to gather the following items when applying for a car loan:
The lender may also want to know the vehicle’s mileage, make, model, VIN, and year. These are generally listed on the vehicle registration. If you qualify for a loan that meets your needs, the sum will pay off the existing car loan. That leaves you with one, hopefully, lower monthly payment and reduced financial obligation.