Did you take out an auto loan on a used car with a bad car? And now you are searching for a way to refinance a used car loan at a lower interest rate to save money? It is possible if you consider refinancing the loan. However, this option is only available if you and your vehicle meet the lender’s requirements and end up qualifying for the loan.
Refinancing requirements for your vehicle
Not every car is fit for refinancing and thus ends up getting rejected by refinancing lenders. It makes sense to be concerned when you end up taking a loan for a used car. What are the refinancing requirements?
Every lender specifies varying requirements, but these three requirements are the same everywhere and must be fulfilled, or you will lose your refinancing chance:
· Your loan can’t be upside down.
To refinance, you must have equity in your vehicle. Having equity means that the cash value of your car is worth more or equal to your loan balance. If it is less than your loan balance, you have negative equity, and it is called being upside down in the loan. Because of this, you will not be able to refinance right away.
- Your vehicle must meet the age and mileage requirements.
The age and mileage limit for a vehicle varies depending on the auto loan refinancing lenders and their preferences. However, cars with an age older than 20 years and mileage over 100 000 miles have a very slim chance to qualify for refinancing.
- Other requirements for the vehicle
The lenders are most likely to reject cars that are used for commercial/business names. Therefore, if your car carries a salvage or has a rebuilt title, it will get disqualified for refinancing.
Refinancing requirements you need to meet
Now that you are aware of the requirements demanded by your vehicle. Let’s focus on what improvements you need to qualify for auto loan refinancing. The borrower must also pass for refinancing. And for this purpose, there are a set of demands that need fulfillment.
Most of the time, you cannot refinance right away after taking out the original auto loan. You must continue paying payments for the loan for a year and wait. In this time, you prepare your credit score for refinancing and take care of things that need attention. Here are the requirements that a lender looks in a borrower:
- You must have an improving credit score.
This requirement is one of the essential ones. The lender will turn you away if your credit score hasn’t improved a bit since you last took out the car loan. It is rare to get accepted for refinancing when having a bad credit score. But don’t rely on this option at all.
- You have to be current with your payments.
As a borrower, you must show responsibility and pay the monthly payments right on time. Or else it may threaten your chance to qualify for refinancing.
- Your loan amount must fit in the lender’s range.
It is another considerable demand by the lender. Your old loan balance must fall within the lender’s maximum and minimum range. Lenders have set a varying limit, so you don’t have to worry about that.
Tip by CarLoanRefinancing:
If your credit score didn’t show significant improvement since you took out the loan and you want to lower monthly payments, then consider refinancing your loan to extend the term. As explained above, lenders don’t accept a borrower with bad credit for refinancing, but some may show some leniency and consider you. Showing consistency in monthly payments also increases your acceptance rate.
The bottom line
By rate shopping, you can see if it’s worth refinancing a used vehicle or not. Every lender has different varying sets of demands and offers.
For this purpose, CarLoanRefinancing started giving a helping hand to people who are new to refinancing. We have partnerships with various dealerships across the nation, who provide offers to credit-challenged individuals.
Complete our fee-free auto loan request form to get connected with us. And we’ll help you find a suitable lender for refinancing.