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If I Refinance My Car Loan, How Do I Know the Pay Off Amount?

Finance | 04/15/2022 22:00
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Refinancing your car loan can seem like a complicated and confusing process. But it is actually super simple and easy! 

Refinancing is when you take out one loan to pay off another loan.  But how do you know what the payoff amount will be?

Here’s how to calculate your car loan payoff amount and refinance your car loan.

How to Calculate Your Loan Payoff Amount

Check for Prepayment Penalties

When determining your payoff amount, you need to check to see if your current loan has any prepayment penalties. Some do not have any fees associated with an early payoff, while others will have fees that are high enough to discourage refinance.

Look carefully through your paperwork to determine what the penalties are. If it is unclear to you, call your lender and ask. 

Call or Go Online

The easiest way to calculate your total loan payoff amount is to go online or call your lender directly. Many lenders have calculators available so that you can pick a date in the future and calculate your payoff from then. 

You will most likely need to have your account number and your VIN available to log on to get this information. So be sure to have your information handy (your account number should be listed on your latest car loan statement).

Do the Math Yourself

If you prefer, you can do the math yourself to get an estimate. Get out your loan contract and determine the total principal amount on your loan. Then you will need to calculate your interest payments. You do this by calculating your annual percentage yield (APY). You can use the formula below:

APY= (1- rate per period)(number of periods per year - 1)

This gives you the total cost of interest. You will need to add this to the principal amount of the loan. Then, subtract any payments you’ve already made. Add in any prepayment penalties, et voila, you have your total loan payoff amount. 

Payoff Amount = Principal + APY + Prepayment Fees - Previous Payments

One you have an amount, you can determine whether or not it is worth it for you to refinance your car loan.

Is it Worth it to Refinance A Car Loan?

So how do you decide whether or not it’s worth it to refinance your car loan? You already know how much it will cost you to pay off your existing loan, so now you need to determine how much your new loan will cost you. 

This will depend on the deals you are able to get for your refinance. Refinance offers are based on a number of factors, including market interest rates and your personal credit score. The higher your score is, the better chance you have to get a lower interest rate (and therefore save more money).

Set yourself up for the best refinance offers by doing the following:

Make Sure Your Credit Score is in Tip Top Shape

Request a copy of your credit report and look for any inaccuracies. Cross check your report with your credit card and bank statements and be sure everything lines up. If there are any problems, report them to the credit bureau immediately. 

If your score is a little low, consider waiting a few months to refinance your car loan. Use this time to make consistent, on time payments and pay down any accounts that have a high credit utilization ratio (the amount of debt compared to your credit limit). Set up autopay on any accounts that have that option so that you don’t miss a beat. 

Make Sure Your Car Qualifies

Some refinance companies will not refinance your loan if your car is ten years or older or has over 100,000 miles on it. Be sure your car qualifies before you get too deep into the refinancing process.

Do Your Research

Research different lenders to get an idea of what terms and rates are being offered. Until you apply you will not have any solid number to use to calculate how much money you will save. But you can get a sense of what some offers look like, and you can see what their current customers are saying about them. Which lenders are transparent with their fees and payments? Who has good customer service? All of these things are important when decking who your next lender will be.

Play Out Some Different Scenarios

Since you will not have offers until you actually apply, play out a few different scenarios with a pad and paper. See what your payments would look like at 6% over 4 years, or at 5.5% over 3 years. This will give you a ballpark of how much money your new loan will cost you. It will also show you where your tipping point is: that is, at what point refinancing will not make sense for you.

What is Needed to Refinance A Car Loan?

When you are ready to refinance your car loan, you will need to have certain documents. Here are some of the documents you may be required to provide:

  • 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. 

Having all of these documents together and ready to go will help make the process of applying for refinance quick and easy.

Use a Company that Specializes in Auto Refinance

Ultimately, your best bet is to use a company that specializes in auto refinance, like Auto Approve. When you use a company that deals in auto refinance day in and day out, you know you are in good hands. We can help you easily apply and compare rates, and help you decide if refinancing your car will be worth it for you.

But won’t it be more expensive to go through Auto Approve? Absolutely not! In fact, we NEVER add on to the rates from our lenders, we pass all of the savings on to you. 

Refinancing a car loan is easy when you are in the right hands.

And that’s how to calculate your loan payoff amount and decide if refinancing your car loan is right for you.

Don’t wait, get started with Auto Approve today. Get your free quote to see how much money we can save you on your monthly cay payment!


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*APR and Fees Disclosure: Auto Approve works to find you the best Annual Percentage Rate (APR), which is based on factors like your credit history, vehicle and desired payment terms. Fees to complete your loan refinance vary by state and lender; they generally include admin fees, doc fees, DMV and title. Advertised 6.24% APR based on: 2019 model year or newer vehicle, 730 minimum FICO credit score, and loan term up to 72 months. All loans subject to credit and lender approval.
Auto Approve has an A+ rating with the BBB and is located at 2860 Vicksburg Lane North Plymouth, MN 55447. Auto Approve works to find its customers the best terms and APR, which are based on factors like credit history, vehicle, and desired payment terms. Loan amounts, costs, and fees vary by state and lender; they generally include admin fees, doc fees, DMV, and title fees, depending on the lender and period of repayment. There is no fee to obtain a quote and all refinancing-related costs are included in the amount financed so there are no out-of-pocket costs! For more information, please go to AutoApprove.com.