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You've come to a point where you know the what and why of refinancing your vehicle. You know that refinancing your auto loan can lower your interest rate, reduce your monthly payments, and reduce the amount of money you are paying overall. And you know that the low interest rates on offer today make it an excellent time to refinance your auto loan. But how do you know which lender is the best option for refinancing?
Well, have no fear, because we’re here to help! In this blog, we will review how to get started with the refinance process and go over what you should be looking at when you are comparing lenders.
Here’s how to pick the best lender for your auto loan refinance.
When you decide to refinance your auto loan, it’s important to look around and compare your options with different lenders. The higher your credit score is, the more options you will have when it comes to refinancing. But no matter what your credentials are, you should never settle or agree to terms that are not beneficial for you. Here are the top things to consider when choosing a refinancing lender.
Getting Started with Your Vehicle Refinance
You won’t have a really good idea of what terms you are comparing until you actually get the ball rolling for your refinancing. You should gather quotes from a wide variety of lenders, then aim to apply for refinancing with three to five different lenders. This will give you a number of options, as well as give you some negotiating power. Start by looking around at a dozen or so lenders and whittle your list down from there. Look at credit unions, traditional banks, and online lenders. Keep your eyes open for deals, and then try to get your list down to three to five lenders.
When you are ready to start applying, make sure you fill out all of your applications quickly. When you apply for a new account it will trigger a hard inquiry on your credit report which temporarily lowers your credit score. Apply to all of your lenders in the same 14 day period so that they will all be counted as one hard inquiry (credit bureaus allow this window for this exact reason).
Or, if this all sounds intimidating, you can simply use Auto Approve, and we'll do all the legwork for you! With Auto Approve, you can get a free quote in minutes, and one of our trusted Auto Approve advisors will help talk you through your options to make sure you get the refinancing that's right for you. Using a service like ours is more efficient and gives you a guide to the process who knows vehicle refinancing through and through. This will save you a lot of time and frustration (trust us, we know!).
At Auto Approve, we handle the work of shopping around for you. No need to go from bank to bank asking the same questions and filling out the same forms–we handle all of that for you. All you need to do is fill out our quote form, and we will help you go through your options, then apply to your top lender (or lenders) on your behalf. Plus, our established relationship with lenders means that you will get the best APRs available.
Once your refinance offers start rolling in, here are some things to compare.
One of the most important factors in refinancing is the interest rate. After all, the point of refinancing is to save you money. The interest rate that you are offered will be based on a number of factors, including but not limited to:
- Your credit score
- Your payment history
- Your income
- Your debt-utilization ratio
- Prevailing interest rates
The interest rates you are offered can vary greatly based on the lender, so you should be sure to check interest rates when comparing options.
If you have made 6-12 months worth of steady loan payments, your credit score has likely increased since you first financed your vehicle and therefore the interest rate you are offered may be much better.
Your Cash Flow and the Payment Terms
You might be offered a few different rates that are tied to different payment periods. A lower APR might be tied to a shorter payment period of 24 months, while a higher APR may be tied to a longer payment period of 48 months. The shorter payment period will mean that your monthly payments are on the more expensive side, while a longer payment period will mean that your monthly payments are on the less expensive side. What is more desirable given your current situation? This can make for a significant swing in your monthly budget, so be sure to think this decision through thoroughly.
Read the fine print in each refinancing offer. Are there prepayment penalties associated with paying off your loan early? If you are thinking that refinancing again might be an option in the future (there is no limit to the number of times you can refinance a loan), this may persuade you one way or another. These prepayment penalties can vary widely from lender to lender and be quite expensive at times.
Customer Satisfaction Ratings
What are their current clients saying? Are these good and reputable lenders, or are their customers dissatisfied with their services? Check out websites like TrustPilot, Better Business Bureau, and Lending Tree and see what some common complaints are.
According to Consumer Financial Protection Bureau, these are the top complaints with lenders:
- Communication issues in regards to forbearance (when you pause your payments temporarily)
- Repayment options for forbearance
- Delays from lender with regard to loan modification
- Overcollection of funds for taxes and insurance
- Confusion with account notices
- Putting overpayments into an unallocated fund rather than applying them to the loan’s principal
Complaints with lenders often center around communication issues and a lack of transparency as to where your payments are actually going and being allocated. These complaints should be taken seriously, as hidden fees can add up to some serious dough. Learn from the experiences of others and steer clear of problematic lenders.
(All that said, when you use Auto Approve for your refinance, you get access to some of the best and most trusted lenders in the biz!)
Look over the terms of your loan contract very closely. What other fees may be associated with your refinancing? See if any of the following fees are charged by the lenders:
- Application fees
- Processing fee
- Administrative fees
A lender may charge one or all of these fees, and the terms might be used interchangeably. They are often considered the cost of doing business, but it’s always worth it to compare these fees to get the best final price. If you're feeling brave and are a desirable potential loan recipient, you can even push to see if potential lenders will waive any of these fees to win your business. But don't tell them we told you that.
Those are our top tips for deciding which lender is the best for your car refinancing.
We know how overwhelming the prospect of refinancing can feel. But don’t let paperwork or pushy salesmen intimidate you. At Auto Approve, we make the refinancing process as simple and seamless as possible (we even handle the DMV paperwork for you!).
So skip the struggle and don’t go through this process alone. Get started with Auto Approve today so we can be your partners and advocates in refinancing. With an A+ rating from the Better Business Bureau and a 96% would-recommend rating on Lending Tree, you know you will be in good hands.