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How Long Should I Wait To Refinance My Car Loan if My Rate is High?

Finance | 02/25/2022 23:00
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Is your car loan APR high? If so, you are probably thinking about refinancing your car loan.

But how do you know when it is the right time to refinance a car loan? Refinancing is all about timing, after all. So let’s jump in!

How Long Should You Wait To Refinance Your Car? 

It is possible to refinance car loans at any point. But when is it the most beneficial to do so?

At the bare minimum, you will need to wait 60 to 90 days to refinance your car loan. This is about how long it takes to complete all of the necessary paperwork and get everything filed where it needs to go.

Experts recommend waiting at least six months to refinance your car loan. This will give your credit score a chance to bounce back after the initial hard inquiry on your account. It will also give you the chance to make consistent, on time payments to your current loan. This will help improve your credit score and prove to future lenders that you are reliable when it comes to repayment. 

The earlier you refinance your car loan, the more beneficial it will be to you. Why? Because car loans are amortized and front loaded. This means that in the beginning of your loan, your payments go more towards the interest than towards the principal. So when you are refinancing to a lower rate it will be more beneficial when you are paying the most towards that interest, i.e. in the beginning of the loan.

You want to find the sweet spot where your credit score is at its best, ensuring you will get the best interest rates available, and where you are paying a lot towards interest, ensuring it will be most beneficial to you.

Pro Tip: Be sure to check your existing auto loan before you refinance to see if there are prepayment penalties. These penalties can be heavy and may outweigh the benefits of refinancing.

Understand How A Car Refinance Works Before You Sign

But wait: how exactly does car refinance work?

Car refinancing is when you pay off your existing car loan with a new loan, one that ideally has better terms and a better interest rate. If you have a low car loan APR and good terms, then great! You don’t need to worry about refinancing. But if you are like most car owners out there, you are probably overpaying on your car loan. So what are the qualifications to refinance your car loan?

  • Your car’s age and mileage. If your car is older or has more than 100,000 miles on it, lenders may not want to refinance your loan.

  • The time left on your loan. If you have less than a year left on your loan, lenders may not see it as worthwhile to refinance your loan.

  • Your credit score. Your credit score should be in good standing to refinance your car loan. 

  • Your current payments. Lenders will want to see that you are up to date on your payments with your existing lender.

Ok, so you meet the qualifications. But why should you consider refinancing your car loan? How beneficial can it really be? Refinancing your car loan can be a great idea for a lot of reasons.

  • You can save money in the long run. A lower APR means that you are paying less in interest over the length of the loan. This can add up to thousands of dollars over the years.

  • You can lower your monthly payments. If you need a little more breathing room every month, refinancing your car loan can lower your APR, which will lower your monthly payments. It will also allow you to change your repayment period. This means that you can choose to repay your loan over a longer period of time, which will automatically lower your monthly payments. 

  • You can add or remove a cosigner. People have cosigners for many different reasons. Maybe you have added on a friend because they have a better credit score, and it secured you a better rate. Or maybe you have your child on as a cosigner to help them build credit. No matter what the reason is, any change that you may want to make to your loan arrangement will require a refinance. You cannot simply add or remove a cosigner from an existing loan.

Car refinancing has a lot of benefits and can save you a lot of money in the long run.

What Fees Do Car Refinance Companies Charge?

Refinancing a car loan is much different than refinancing a mortgage. While mortgage refinancing requires appraisals and closing costs, auto refinancing is much simpler. 

Typically your biggest fee will be your title fee, which is usually around $75. On top of that, the lender may charge a processing fee of $10 to $15 dollars. If your existing loan has prepayment penalties, you will be required to pay those as well.

Some car refinance companies will charge additional fees when they refinance your car. This often comes in the form of them tacking on a percentage to the APR that the lender offers. 

At Auto Approve, we don’t believe in that. We want the savings to be passed on right to you. That’s why we never mark up our rates the way that some of our competitors do.

Auto Approve is committed to making the auto refinancing process as easy as possible. That’s why all you need to do is head to our online quote form, answer a few quick questions, and let us handle the rest! We will shop around and get you multiple quotes from different lenders, handling all that legwork so you don’t have to. Then you can pick which deal and lender is the best for you!

After you pick your offer, we will send you all of the documents that you need to sign electronically, so you can complete your refinance from the comfort of your home. And that’s it! We will even handle the pesky DMV paperwork for you. 

You don’t need to take our word for it. Our customers are raving about how easy and hassle free refinancing a car loan with Auto Approve is. We have an A+ rating with the Better Business Bureau and our customers have given us a whopping 96% would recommend rating on LendingTree. Not to toot our own horn, but we definitely know what we are doing when it comes to refinance.

The sooner you refinance your car loan, the more money you can save in the long run.

So, what are you waiting for?


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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.