Hear From Our Editors: The Best Auto Refinance Loans And Rates Of 2021
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What Do You Need To Refinance Your Car
Since it isnt much different than making a car purchase, chances are you already have most of the information you need. However, before you take the leap, be certain that you are eligible to refinance. Consider whether you have defaulted on the lease or are in good standing. Be sure that your and working situation are stable and viable for refinancing. Provided you are eligible for the new loan, the next step is getting your documents together.
Tax information is a common request, so bring your most recent filing records. Additionally, three months of pay stubs from your employer are necessary as well. Plan ahead and bring your banking details. Often, people go with a void cheque to speed up the process and eliminate the chance of errors. You will also need relevant identification. Both a government issued photo ID and a second identification are required. A drivers licence and a passport are both suitable options. Additionally, be sure to have all the necessary details for your vehicle. Registration documents work well for this purpose.
Ensuring that you have all the essential documentation is not only important, but it is also a great way to speed up the process and develop a better rapport with the lender. Preparing ahead of time gives you a good opportunity to highlight all reasons for refinancing in an organized manner.
Can You Refinance With The Same Lender
The short answer is, yes, you can refinance with the same bank or lender.
If youre satisfied with your current lender, that could be enough motivation to refinance with the same lender. But while the benefits of good customer service are significant, youll still want to ensure your existing lender can meet your refinancing goals before you sign on the dotted line.
If you do work with your current lender, be sure you fully understand the terms of the new loan. Just because youve worked with it previously doesnt mean you shouldnt scrutinize everything. If youre struggling to decide whether the new loan terms make sense in the long run, a mortgage refinance calculator can help you get a better understanding.
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Rule Of Thumb Of When To Refinance A Car Loan
The bottom line is that, while there is nothing to stop you from trying to refinance at any time, it is generally better to wait at least a short period of time.
At IFS, we use the following rules of thumb to guide customers on when to refinance their auto loans:
- Wait at least 60-90 days from getting your original loan to refinance. It typically takes this long for the title on your vehicle to transfer properly, a process that will need to be completed before any lender will consider your application. Refinancing this early typically only works out for those with great credit.
- Consider refinancing after six months. If you have fair to great credit, you will begin to have refinancing options after this length of time.
- If you are a first-time car loan borrower, wait at least a year to refinance your loan. A first-time borrower typically needs to build up a good car loan payment history before refinancing.
Before you jump in, it might be a good idea to think about what you hope to get out of refinancing. We did a full write-up detailing three reasons you might want to refinance. Additionally, read our guide covering what refinancing might do for you.
Why You Might Want To Refinance With A Different Lender
When saving money is your main reason to refinance, switching lenders may be a good idea if theyre offering much lower rates and better terms.
If you want to maximize your savings and dont mind jumping through the paperwork hoops to prove your creditworthiness to a new lender, then choosing a new lender for your refinance may be your best bet, Pierce says.
However, the process could take a little longer, possibly 45 days, since youll have to fill out a loan application and provide supporting documents, like pay stubs and tax forms. The new mortgage company also checks your credit and may require a home appraisal.
Refinancing with a new lender doesnt mean youll have to deal with two mortgage companies. When you refinance, your new home loan replaces the old one, and the new bank pays off the original loan, Anastasio says.
You will only need to correspond with your current lender, as they will handle communications with your previous lender, she says. In addition, youll make only one payment to your new mortgage company.
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Try To Negotiate With Your Existing Lender
In addition to finding a better deal elsewhere, shopping around gives you leverage for negotiating your refinance deal with your existing loan provider.
Its very possible, if you get a better offer, that your existing lender will try to match or beat it to keep your business, Anastasio says.
Existing lenders might match a lower interest rate you found elsewhere, or alter the loan terms or lender fees, Anastasio explains. Be aware that some lenders may charge points in exchange for a lower rate. If thats the case, refinancing there might not be worth the cost.
To find out whats right for you, get a loan estimate from multiple mortgage companies. This lays out all the costs of refinancing, including interest rate, monthly payment, and closing costs, with application, origination, and underwriting fees. This way, its easy to compare whos offering what.
Find the best rate and terms, and see if your current lender will match it, Pierce says. But be prepared to go somewhere else if cost is your No. 1 priority.
Determine If Your Car Qualifies
While each bank has its own qualification requirements, most banks will not refinance a vehicle if it, or the loan, meets certain conditions, such as the following:
- Your current loan has less than $7,500 remaining.
- Your car is over seven years old.
- Your car has 100,000 miles or moreâsome banks set the cap at 70,000.
- You use the car commercially.
- Your car has a salvage title.
You also won’t have much luck refinancing a motorcycle or RV. Some banks may even rule out certain vehicle makes.
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Consider Applying For Prequalification
Take some time to shop around and see which offers you may qualify for. Applying for prequalification can be a good place to start. To get prequalified, the lender will look at certain information, like your credit and type of vehicle. Prequalification is typically considered a soft inquiry, which wont hurt your credit all on its own. But prequalification is not a guarantee of approval, and if you decide to apply for the loan, youll ultimately have to apply for it and face the hard inquiry that goes along with it.
Check around with several lenders and compare the interest rates, loan terms and total cost of borrowing available to you. Find out if any of the loans qualify for an autopay discount. Opting into this feature may lower your interest rate and help ensure you dont forget a payment a win-win for you.
You may be tempted to choose an offer with a longer loan term, which could result in a lower monthly payment. But keep in mind youll end up paying more in interest and increase your risk of becoming upside down.
Above all, consider the main reason you want to refinance and whether each loans terms address that need.
Can You Refinance With Your Current Lender
You can refinance through your current lender provided you qualify because financial institutions generally want to keep their customers.
The latest Mortgage Monitor Report from Black Knight, a leading provider of public property data, shows that just 18% of homeowners in the first quarter of 2019 stayed with their current mortgage company after refinancing. The data cites a refinance market in which competition for your business is rising.
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Use Your Car To Make Money
Rather than your car costing you money, you could use it to help you make money. The benefits:
- Keep your vehicle
- Make payments more easily
The biggest con of doing this is you may have to work more. Still, there are several ways to make passive income with your vehicle, including renting it to others, letting companies put advertisements on it and earning auto insurance discounts. Here are passive and active ways to make income with your car.
The Benefits Of Refinancing An Auto Loan
Now that youve answered Can I refinance my car with the same lender?, its worth taking the time to explore the benefits of refinancing an auto loan. Refinancing a car loan can result in:
- Lowering your monthly payments
- Extending or shortening the length of your loan
- A reduction to your , which will reduce the amount of interest that you will pay over the life of your loan
- Obtaining a lender that has more convenient payment options
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How To Refinance A Car Loan With Bad Credit
Even if your credit score has gone up, if its still under 640, getting the best rates on an auto refinance is unlikely. There may be, however, some cases in which refinancing may be beneficial:
If auto loan rates have gone down – While new-car rates are different from refinance rates, you may have some wiggle room. If your goal is a lower monthly payment – If your main refi driver is decreasing your monthly payment, this may mean extending your loan term. The downside is that this will extend the life of your debt, and youll therefore pay more in interest as well.
If youre determined to refinance your car loan despite a spotty credit history, follow the steps outlined above. It may make sense to check out competing offers on a marketplace website such as LendingTree or rateGenius. You may also be able to get a better deal with a lender that allows you to add a co-signer to your loan.
By Step: How To Refinance Your Car
Similar to a mortgage refi, refinancing your car basically means you are replacing your original financing package with financing that may have more favorable terms. If youre interested in refinancing, its typically a simple process.
To begin, you may want to start by requesting pre-qualification. This initial evaluation gives you an idea of how much a financial institution is willing to lend you. Pre-qualification only requires a soft inquiry, meaning your credit score will not be affected, so it can be a good idea to obtain pre-qualification from multiple lenders.
Next, as you move forward with the refinancing process, you will need to gather some documentation to apply for credit. Some of the information youll need will include:
- Information about your existing financing
- The VIN along with the make, model, and year of your car
- Proof of income
- Your drivers license
- Your Social Security number
Depending on the lender, you may be able to complete the majority of the refinancing process digitally. With Ally Clearlane, you could easily be pre-qualified in minutes and submit an application for approval online.
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Your Credit Score Has Improved
Even within the first 12 months or so, your credit score may have improved enough to make you eligible for a significantly lower rate. Perhaps you corrected a mistake on your credit report or paid off most of your outstanding debt. Maybe youve demonstrated that youre responsible by paying all of your bills on time, or youve had a big increase in income. Whatever the reason, an improved credit score can make getting a better loan deal far easier.
You Want A New Lender
Some banks, , and other lenders reward loyal customers with low rates. They may also offer special deals to attract new customers, especially those unhappy with the car loan they got at their local dealership. If youve developed a relationship with one of these lenders and qualify for a competitive rate, auto refinancing may be the way to go.
Auto Refinance Calculator
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Possible Outcomes When Refinancing Your Car
Not all car loan refinance deals are the same, but customers who choose to refinance often seek one of the following goals :
Lower Your Monthly Car Payments
Most of the time, people seek car loan refinancing to lower their monthly payments. This priority is understandable since monthly car loan payments can have an immediate impact on a households monthly finances. However, your monthly payment should not be the only consideration when refinancing
There are two ways to lower your car loan monthly paymentsyou can get a lower interest rate, you can extend your loan term, or both. Usually, the best way to lower your car loan payments dramatically is to extend the number of months over which you pay for your car. However, when you extend your loan term, you may end up paying more for your car in total than you would without extending it. Still, if your lender allows you to extend your loan term and gives you a lower interest rate, you may benefit by both lowering your monthly payments and paying less in total for your car. The example below will illustrate how this outcome can occur.
Change the Length of Your Car Loan Terms
Sometimes refinance customers seek refinancing to change the length of their loan terms. However, this goal usually has more to do with lowering monthly payments than changing how many months in which a customer pays for his/her car.
Remove or Add Someone as a Co-Signer to Your Loan
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How Soon After Purchase Can You Refinance A Car
Editorial Note: The content of this article is based on the authors opinions and recommendations alone. It may not have been previewed, commissioned or otherwise endorsed by any of our network partners.
Youve taken out a loan to buy a new or used car and you suddenly discover that youre paying an interest rate that is much higher than it should be. Or maybe you found that you cant afford the monthly payments.
One option may be to refinance the loan at a lower rate and, if need be, for a longer term, which could save you money and reduce the amount of your payment, though it may add to your debt load by extending the length of your loan. Refinancing is possible even with a new loan, although there are special factors to consider.
Refinancing Auto Loan With Same Lender
Nicholas Hinrichsen – Published: October 1, 2021
- That you’re current loan balance is lower than the value of the car
- That your credit has not gotten worse since you originally received the loan
- That your vehicle is newer than 2010 and less than 120,000 miles typically
Consumer Solutions
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How To Prepare For Refinancing
Unlike a mortgage, auto refinancing should only require a few documents. Gather the following information before you begin so you have all the facts when asked about them:
- A copy of your current loan papers
- Information about your vehicle, like the VIN and current mileage
Next, before you start shopping for a new loan, you need to know where you stand with your current loan. Consider the following questions:
- What are you paying in interest?
- How many months do you have left on the loan?
- What is your current payoff amount? This is the amount you would pay the lender if you paid the entire bill today.
- Is there a pre-payment penalty in place? Some lenders only allow borrowers to pay off a certain amount of their loan each year without a penalty. It is more common with a home mortgage, though may apply to some car loans.
