How Long Should I Wait To Refinance My Car

Who Should I Refinance My Car With

If you have decided to move forward refinancing your car loan, finding the right lender is the best way to make sure you get the best terms possible.

There are a few options when it comes to refinancing your loan. If you like your lender, you could talk to them first. If you have made your payments on time regularly, and qualify for better interest rates or other loan terms, they may be willing to work with you. If that fails, you’ll want to chat with other lenders. This is an important part of the process and one you shouldn’t skimp on.

Can You Refinance A Car More Than Once

Refinancing is meant to help you lower your monthly auto loan payments, or give you longer to pay for a vehicle you love. While there’s technically no limit to how many times you can do this, it may not be wise, or possible to do it more than once. Here’s a look at why that may be the case if you have a car loan.

Why refinance in the first place? If you have a car you want to keep, but the terms of your loan aren’t what you’re looking for, refinancing can help. It makes the most sense to refinance if you need a little wiggle room in your budget.

The best way to do this is to try to refinance to a loan with a lower interest rate. Lowering your interest rate means paying less each month, and saving in overall interest charges. But, a lower interest rate isn’t the only way to achieve a lower monthly payment. You can also get this by qualifying to refinance for a longer loan term. Keep in mind though that while this lowers your monthly expense, it doesn’t save you overall unless you have a lower interest rate too.

Refinancing more than once may not help. If you already refinanced your car, you know that your credit situation must be good or improved to qualify, and your loan and vehicle both need to fit within the lender’s parameters. What you may not know is that you generally need to wait to be eligible for refinancing usually for at least one to two years after getting a loan.

Wait To Not Be Underwater

Unlike homes, cars tend to depreciate over time. This is especially true with new cars because theyre considered used as soon as you sign the paperwork.

If your loan repayment term is longer than 60 months , you run the additional risk of your car losing value faster than you can pay it off. This is one reason why you should think long and hard before you buy an expensive car and justify the purchase because you were able to stretch out the payments.

Lenders want to know that theyll see a return on their investment, which is why a car loan is a secured loan. Secured loans require collateral. And in this case, the collateral would be your car.

If you find yourself owing more on the car loan than what the car is worth, that means youre underwater on your car loan, and lenders may not be willing to refinance.

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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.

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Entering A Longer Loan Term

When you refinance your auto loan, you may push out your loans maturity date. For instance, if youre six months into a 60-month loan, you have 54 months remaining. If you take out a new 60-month loan to refinance your current one, youre effectively extending the life of your loan.

Extending your loan term can be a mistake but not always. A longer term may ultimately cost more since youre paying interest longer. So, it depends on your new interest rate and how fast you repay your balance. On the other hand, the savings could outweigh the cost, not to mention the lower monthly payment.

Auto Refinance Calculator

Your Credit Has Improved

People with excellent credit have a higher chance of getting approved for the best loans. Alas, not everyone has excellent credit.

Maybe you had limited credit history when you first drove off the lot. Maybe you carried a high balance on your credit cards at the time. Regardless, if youve improved your scores, then it could make sense to explore refinancing.

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Is The Time Right To Refinance Your Car Loan

Interest rates are still hovering near historic lows for mortgages, but did you know that those same super low rates also may make it wise to refinance your car loan?

You may have heard of refinancing a mortgage but did you know you can also refinance a car loan? If you decide to refinance, you may save money in a number of ways

• Your current interest rate is high. When you first bought your car, you may not have qualified for the best rate. Or, since you originally took the loan, your credit score may have improved, entitling you to a better, lower rate. In some cases, rates in general may be lower and can be applied to your balance.
• You want to lower your monthly payments. A lower interest rate can reduce your monthly payments without increasing the term of the loan.
• You want to pay your loan off sooner. If you qualify for a lower interest rate, you can continue to make the same monthly payments and pay off the loan faster than you originally planned because more of the monthly payment will be applied to principal.

Sounds great, right? For some people, it’s a beneficial financial choice. One way to decide is to use a calculator tool to estimate your potential savings.

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 dont believe in that. We want the savings to be passed on right to you. Thats why we never mark up our rates the way that some of our competitors do.

Auto Approveis committed to making the auto refinancing process as easy as possible. Thats 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 dont 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 thats it! We will even handle the pesky DMV paperwork for you.

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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 dont 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 cars 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.

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

What To Do If You Cant Get Approved For A Car Loan Refinance

If youre having trouble getting approved for a car loan refinance, you can do a few things. First, you can ask your lender why you didnt get approved. They should be able to give you feedback on what areas you need to improve.

Some reasons you wont get approved are having too much debt, not enough income, or a history of late payments. You also may get denied if youre upside down on your loan, which means you owe more than the car is worth. If youre upside down on your loan, you can try to find a lender who offers refinancing for upside-down loans.

Some lenders also wont allow you to refinance your loan if your car is too old. To qualify for a loan, some lenders set restrictions on the age of the automobile. They also may be hesitant to offer to refinance if you just bought your car. Lenders like to see a history of on-time payments, so it may be difficult to get approved if youre new to car ownership. Therefore, try to have your loan for at least 6 months before refinancing to maximize your odds of being accepted.

If your lender cant help you, try reaching out to a credit union or credit counseling agency. Similar to a financial institution, they may be able to help you get your finances in order so you can qualify for refinancing.

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How Long Should I Wait To Refinance A Car Loan

I took out a loan to purchase my dream car, and Iâm thrilled to finally buy it! I took out a loan with the dealership because I got some bonus cash. Now that I have the cash, I want to refinance the car with a better interest rate. Can I refinance a car loan immediately after purchasing a car?

While you can refinance a car loan immediately after buying the carnegative equityat least six months to one yearnegative equityloan-to-valuein minutes

Pros Of Refinancing A Car Loan

• You can get a lower rate and a lower monthly payment: This can save you money over the life of the loan.
• You can shorten your current loan term: This will save you money in interest payments and mean that youll pay off the loan sooner.
• You can get cash out: If you have equity in your car, you can refinance for more than you owe and use the extra money for something else.
• You can consolidate debt: If you have other obligations, you can refinance your car loan and use the extra cash to pay off those debts.
• You can switch from an adjustable-rate loan to a fixed-rate loan: This option lowers your interest rate to help you lock in a lower interest rate if interest rates have dropped.

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You May Already Have The Best Rate

If you purchased your car new, you likely got an attractive new car rate, especially if you took advantage of a special interest offer that can feature rates as low as 0% APR. The refinancing rates for some lenders, among them Bank of America, are higher than even their used-car rates. Also, interest rates have been at record lows due to COVID-19 experts predict rates will begin to rise in late 2022 to 2023.

Wait To Find The Best Rate

Dealer financing can be competitive. When dealers make offers, theres nothing to stop them from recommending the financing options that work best for them.

Take some time to shop around for a good interest rate with another financial institution or lender. Your local credit union or an online lender may have competitive car loan refinancing rates.

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You Took A Rebate Rather Than A 0% Apr Deal

Automakers frequently offer incentives on new vehicles to boost their sales, such as 0% APR financing and rebates. Often, consumers with excellent credit who qualify for these types of deals have a choice between a large rebate or a low-financing offer. For example, you may have a choice between a cash rebate of $2,000 or 0% APR financing. If you take the rebate, youd have a 4.00% APR. If you choose the 0% APR financing offer, you will lose the $2,000 rebate. In the spirit of have your cake and eat it, too, we typically suggest taking the rebate from the automaker and then refinancing in a month to a lower APR from another lender. To continue the example, if you take the $2,000 rebate with 4.00% APR financing, wait a month, and then refinance to 2.99%, you obtain a large cash rebate and a low APR.

When To Refinance Car Loans

There are many times when it makes sense to refinance a car loan. Ultimately, theyre all different paths to the same goal: saving money on the overall cost of your auto loan, usually by lowering your interest rate. Even half a percentage point can make a difference of hundreds or even thousands of dollars.

The table below highlights how different interest rates can affect the amount you pay in interest.

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How To Refinance Your Car Loan

You can apply online with most lenders or visit a branch if you want a loan from a bank or credit union. Once you submit your application, the lender will review it and run a credit check to determine whether you qualify for a loan and what interest rate you will receive.

This is typically a preapproval process, so you can compare rates without committing.

Once you find and prequalify with a lender to refinance your car loan, reach out before you fully apply to determine what information and documents are needed to process your loan application.

Most lenders will request a copy of your drivers license, a utility bill and proof of income. You will also need to provide proof of insurance along with the vehicles make, model, VIN and mileage.

If you are approved, your new lender will either take care of paying off the old loan or send you the funds to do it yourself. Either way, check with both lenders to ensure all the paperwork and payments have gone through.

How Refinancing Affects Credit Scores

Virtually every time you apply for a loan, the lender will run a hard inquiry on your credit report. According to FICO, this inquiry can knock as many as five points off your credit score temporarily.

Multiple hard credit inquiries can have a compounding negative effect on your credit scores, but if you apply for multiple auto loans within a short periodtypically 14 days but sometimes longertheyll all count as just one inquiry when calculating your credit scores and wont have a negative impact.

When the lender opens a new credit account in your name, it could affect your credit scores again because it reduces your average age of accounts, a factor that influences the length of your credit history.

In both cases, the potential negative impact on your credit is typically minimal and temporary. If you start missing payments on your new loan, however, it could have a bigger and longer-lasting impact on your scores.

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