How to Refinance a Car Loan

Many people run out and buy the cars of their dreams, only to feel like they didn’t get reasonable auto loan deals. Then, the consumers often get into binds financially and can’t make their payments. When that happens, there are different choices on the table. Vehicle owners can roll over, not do much of anything, and watch as banks repo their rides. However, that option isn’t ideal for many because they would then have to rely on public transportation to get around. 

If that solution doesn’t sound suitable for your particular situation, you could also elect to refinance your auto loan. In doing so, you might be able to lower how much you spend on your car payment each month. Not only that, but there is a possibility that you could get a lower interest rate and pay a smaller total in the end than what you had intended. So, if refinancing could be in the cards for you soon, continue reading to learn how to accomplish the feat. 

Get Documents Together

Before visiting a financing company in person, you should first gather documents and have them ready to go. Even if you’ll be applying online, this information still needs to be readily available. 

What paperwork will you need? That depends on what bank or financial institution you choose, as some places may require certain things while others don’t. However, common items necessary for the refinancing process include:

  • Monthly payment amount
  • Interest rate
  • Loan term
  • Social Security number
  • Driver’s license
  • Pay stubs
  • Vehicle information number

Examine Your Credit

The next step is to check your credit. This number won’t necessarily determine what the refinanced interest rate or payments will look like, but having the information on hand will let you see if financing companies are giving you the deals that you deserve. Credit checks can be a bit intimidating and scary, but soft inquiries that people do on their own typically do not affect their scores. 

Apply for Refinancing

It doesn’t matter if you choose to apply at a local bank, credit union, or website; the process remains mostly the same. However, it is best not to put all of your eggs into a single basket by only trying to finance through one business. 

Instead, it would help if you got quotes from several companies. Then, you will have vital numbers at your disposal to compare, like interest rates, loan terms, and payment amounts. By shopping around, you’ll be able to find the financing company that suits your budget best. 

Finance experts also recommend submitting as many loan applications as you can within a 14-day period. This can minimize the impact of queries on your credit score.

Use a Refinancing Calculator

Thanks to technology, people today can do all sorts of things with the few clicks of a mouse or swipes of a phone screen. For instance, individuals can shop online, buy goods, and get them delivered right to their doors. Then again, they can also access refinancing calculators to crunch the numbers. This is the step where you should be now. 

You’ll have to input various details into the refinancing calculator. Therefore, be sure to have the original loan and interest amounts nearby. Not to mention, you will probably need to know the loan’s remaining balance and how many months remain until it is paid off. After you get the calculations, it will be time to determine if it will be worthwhile to refinance your auto loan.

First, go to a site such as Kelley Blue Book or to find out the value of your car. If a company tries to lend you more than the vehicle is worth, that could spell trouble for you in the end. 

In addition, if the figures barely change, refinancing may not be in your best interest. For example, if the monthly note or interest rates are similar to what they already are, and you’re close to the end of the loan, refinancing the auto loan might be more of a hassle than it’s worth.

Some Final Words

You should now know what you’ll need and how to refinance your auto loan. Get your documents together and start obtaining quotes today. Then, you will be able to weigh the pros and cons of refinancing to see if it is something you should do.