We know that an auto refinance can save you a ton of money. We know that it can lessen your monthly payments and give you some breathing room. And we know that it’s a great way to change any terms in your car loan that aren’t beneficial to you.
But how do you apply for an auto refinance? Today we are talking about the process of applying for an auto refinance and getting into the nitty gritty details.
The Steps You Need To Take to Refinance Your Auto Loan
The good news is that it’s actually really easy to refinance. Auto loan refinancing is actually much simpler than mortgage refinancing, and can easily be done in a few hours. As with everything, preparation is key. So let’s get into the steps you need to take to refinance your car loan.
Review your current loan
Look at your current loan contract and review your current terms. Make sure you know the following:
- Current monthly payment
- The remaining balance
- The amount of time left to repay the loan in months (the loan term)
- The interest rate
Additionally, make sure you are aware of any penalties for which you may be responsible. Some car loans have prepayment penalties that you will be responsible for if you end your contract early. Call your lender directly if you have any questions or want to review any of the fine print. Knowing your current loan terms will help you decide if a car loan refinance is worth it.
Collect your documents
When you apply for an auto refinance, you will need to have all of your documents in order. Gather the following so you are as prepared as possible:
- A Photo ID, such as a passport or driver’s license.
- Your vehicle’s information, which may include the bill of sale, VIN number, make, model, and year of your car.
- Proof of income and financial history, which may include pay stubs, banking information, and your credit report.
- Proof of residence, such as a mortgage statement, lease agreement, or utility bill. Note that PO boxes are not acceptable as proof of residence.
- Proof of insurance.
If you are applying online, scan and upload all of your files so they are easy to access.
Check your credit score and report
The car loan APR that you are offered will depend heavily on your credit score, so you want to make sure that your credit score is in good shape. Request a copy of your credit report (which you can do once per year for free) and review it carefully for any errors or mistakes. Be sure that everything is accurate and up to date on your report. You can petition the credit bureau if there are any inconsistencies or errors. Remember, the higher your credit score is, the lower your rate will be. Being thorough in your credit report review can save you a lot of money.
While you will not have any offers to compare until you actually apply, you can do initial research to decide which lenders will be beneficial. Look around online for different credit unions, traditional banks, and online lenders. See what some of the average rate offers are, and look carefully at the customer satisfaction ratings. We recommend applying to three to five different lenders.
To simplify this, you can use a company that specializes in auto refinance, like Auto Approve. We have existing relationships with the best lenders across the country, so you don’t need to research a million companies to know that you are getting the best deal around. All you need to do is fill out your information, and we handle the rest!
Apply to lenders
Be sure to apply to all of your lenders within a fourteen day period. This will ensure that all credit inquiries only count as one hit on your credit report. (If you use Auto Approve, we take care of all of this!)
Compare your offers
When the refinance offers start coming in, compare all of the rates and terms.
- What is the interest rate being offered?
- What is the repayment period?
- Are there prepayment penalties? There is no limit to the amount of times that you can refinance, so make sure you don’t agree to prepayment terms that you may regret in the future.
- Does the lender have good customer reviews? Do customers seem happy with their communication and transparency?
Do the math and be sure that your new savings will offset any prepayment penalties for which you may be responsible.
Sign and Start Saving Money
Once you have compared all of your offers and picked the best car refinancing option, simply sign on the dotted line and start seeing the benefits of refinancing immediately. (And if you use AutoApprove to refinance your car loan, we will even handle the boring DMV paperwork so you don’t have to!)
How Do I Know If my Interest Rate is Good on my Auto Loan Refinance?
The main benefit of auto loan refinance is that you can secure a lower car loan APR and save a lot of money. You should consider refinancing in the following situations:
- When interest rates are low. Interest rates are adjusted based on how the economy is performing. If the economy is not performing well, or is anticipated to not perform well, banks will lower their interest rates to encourage spending. If interest rates are lower than when you first took out your auto loan, it may be a good time to consider refinancing. (Hint: rates are low now, so it’s a good time to refinance)
- When your credit score has improved. Your credit score is a major factor in the car loan APR you will be offered. The most favorable rates and terms are given to those with very good and excellent credit. Even if your score has increased within your bracket, but you haven’t crossed into a better category, it still might be worth getting a few quotes and seeing if you can get a better rate.
- When your income has decreased or your expenses have increased. If money is tight, refinancing can provide some much needed breathing room. You can either get a lower car loan APR which will automatically reduce your monthly payments, or you can lengthen your payment period so that you will pay off the loan over a longer period of time (therefore reducing your monthly payments). Either way this can free up your monthly budget.
Auto refinance sounds like a good option, but how do you know if your interest rate is good?
The quick and easy way to know if your auto loan refinance rate is good is to ask yourself, “is this auto loan refinance rate lower than my existing rate?” If it is lower, then it’s probably worth refinancing. Always be sure to do the math to determine how much money you will save over the course of the loan repayment term.
The car loan APR that you are offered depends on a number of factors:
- Your credit score. Your credit score tells lenders how likely you are to repay your loan, and repay it on time. There is no magic number, but the higher your score is, the better your offered rate will be.
- Your income. Lenders consider what’s called your debt to income ratio (DTI) which compares your monthly debt payments to your monthly income. The lower the ratio, the better your rate will be.
- Your vehicle. Lenders look at your car’s loan-to-value ratio (LTV) calculation to determine if your vehicle qualifies for refinancing. The LTV will help lenders decide if they can recoup their losses should you default and they need to resell your car.
Lenders consider all of these factors to determine if you qualify for an auto loan refinance and what car loan APR you should be offered.
What Are The Best Auto Refinance Interest Rates Today?
The auto loan refinance rates are still incredibly low right now. So if you want to get the best auto refinance rates, you should consider refinancing as soon as possible.
The Fed has announced that it will be increasing interest rates throughout 2022, so the sooner you refinance, the better. You can get the best rates by shopping around and doing your research. But we can save you a lot of work and hassle by handling this for you. All you need to do is collect your documents and answer some simple questions, and we will handle the rest! So if you are looking for the best auto refinance rates today, look no further than Auto Approve.
And that’s how you apply for an auto refinance.
The time has never been better to refinance your car with Auto Approve. But don’t just take our word for it. With a 96% would recommend rating on LendingTree and an A+ rating from the Better Business Bureau, you know you are in good hands. So don’t wait any longer!