When you refinance a car loan you are replacing one loan with another loan. But where should you actually go to get a car loan refinance? The good news is that there are a lot of places that refinance car loans, but not all are created equally.
Here’s where you can refinance a car loan (and why it’s a good idea).
Why do people refinance auto loans?
Car loan refinancing is popular for a number of reasons. By replacing your existing loan with a new loan you can get better terms and ultimately save yourself a lot of money.
You can get a lower car loan APR.
One of the main reasons people choose to refinance their cars is to get a lower car loan APR. You may be able to get a lower car loan APR if any of the following apply to you:
Your credit score has improved since you initially financed.
The market rates have decreased since you initially financed.
Your debt-to-income ratio has improved.
You have been making consistent payments on your current car loan.
Getting a lower car loan APR can save you a lot of money over the life of a loan. It is highly recommended that you focus on improving your credit score as much as possible before you apply for car loan refinance. This will give you the best chance at getting a good rate. The best car loan APRs are reserved for those who have very good or excellent credit, with a credit score above 740. The higher the score, the better the rate will be that you are offered.
Let’s say you have a $25,000 loan with a 9% car loan APR and a 4 year repayment period. Your monthly payments would be $622.13 and you would pay a total of $4,862.05 in interest.
Now let’s say you refinance that loan to a 5% car loan APR. Now your monthly payments are $575.73 and you will pay a total of $2,635.15 in interest. That’s a huge savings.
You can change your repayment period.
Another huge benefit of refinancing your car loan is that you can change your repayment period. Lengthening your repayment period will allow you to pay off your principal over a longer period of time, making your monthly payments much lower. This can be a good option if you are struggling to make your monthly payments. It is important to note that you will end up spending more in interest over the life of the loan. Depending on how tight your monthly budget is, this might still be a good solution though.
You can also choose to shorten your repayment period. This will increase your payments every month but will save you a lot of money in interest over the life of your loan. If you shorten your repayment period by one year, that is one whole year where you won’t have to pay interest.
You can add or remove a cosigner.
If you had a cosigner on your loan when you originally applied for car loan financing, the only way to remove your cosigner is to refinance. If on the other hand you want to add a cosigner, you will also need to refinance. Maybe your loved one has really good credit and they can score you a much better car loan APR, or maybe you want to add your child on to your loan to help them build credit. Either way, refinancing is the way to achieve this goal.
Where can I go to refinance my car loan?
If refinancing sounds like a good option for you, you may be wondering “where can I go to refinance my car loan?” Most lenders refinance car loans, including banks, credit unions, and online lenders. All of these can be good options. While dealerships offer refinancing as well, you will want to avoid refinance your car loan through a dealership. Dealerships essentially operate as middlemen between you and the lender, charging fees and adding onto the money you will have to pay.
Traditional Banks
Refinancing through a traditional bank is the most common way people refinance their loan. Traditional banks can offer pretty quick turnaround and you may qualify more easily if your credit score is less than ideal.
Credit Unions
Many credit unions also offer car loan refinancing. While they tend to have more strict requirements, they tend to offer the most competitive refinancing rates.
Online Lenders
Online lenders are becoming increasingly popular options for car loan refinancing. Online lenders may be your best bet if you do not have the best credit, but their rates may not be as competitive as banks and credit unions.
Car Refinancing Specialists
The easiest and most effective way to refinance your car loan is to use a company that specializes in refinancing. These companies have relationships with lenders across the country and can find you the most competitive rates on the market. They can also help guide you through the refinancing process and assist you with all applications and paperwork.
Can I refinance a car at the same bank?
You can usually refinance your car loan with the same bank that financed your original car loan. But it’s a much better idea to shop around to see what other lenders can offer. When you look for a new car loan, you want to compare the following when you apply:
The interest rate. The interest rate will be based on your credit score, your debt-to-income ratio, and the prevailing market rates.
The repayment period. Look at your cash flow to determine how much you can afford to pay each month.
The prepayment penalties. It’s important to look at the prepayment penalties listed in each offer. There is no limit to the number of times you can refinance, so be sure that these aren’t too excessive. It’s good to have the option to refinance again in the future.
The customer satisfaction ratings. You should always do some research ahead of time to determine what their customers have to say about the company. How is communication? Are they reputable lenders? Bad reviews are a definite sign to stay away and refinance elsewhere.
And that’s where you can refinance your car loan (and why Auto Approve is your best bet for getting the most competitive terms).
There are a lot of reasons why car loan refinancing is a good idea, and there are a lot of lenders that can help you refinance. But refinancing is the most effective when you have competitive offers, which is why using a company that specializes in car loan refinance can save you the most money.
Get in touch with Auto Approve today to find out just how much money you can save!