Generally, people decide to refinance to reduce monthly payments in their minds. You can save cash in two ways through refinancing: by getting a loan with a low-interest rate or by stretching out the loan term. However, your ability to qualify for a good refinancing offer depends on many factors including, your credit score, vehicle, and current car loan. Wondering how does car refinancing work? In this blog, You’ll find the factors necessary for qualifying for auto loan refinancing.
Auto refinancing process
Refinancing means replacing your current car loan with a new one with a better interest rate or an extended term. In this case, the vehicle remains the same, but the lender may or may not be changed. Before refinancing starts, you have to contact your current lender and see whether they are available for refinancing or not. However, most people choose to refinance with a new lender. We can help you find a new reliable lender, and you can compare and search loan offers online.
To qualify, you must have to meet the lender’s requirements. Every lender has a varying set of requirements, but the first one remains unchanged everywhere. It is to have a good credit score. Honestly, the whole refinancing process revolves around your credit score. If you have pulled out the original car loan on very bad credit but have improved since then, you will have the chance to refinance.
Besides your credit score, the factors that determine whether you will be able to refinance or not are your vehicle’s age and mileage. Lastly, your loan balance must fall within the lender’s maximum and minimum limit to get qualified for auto loan refinancing.
The eligibility criteria vary depending on lenders and your state. Here are some other factors that the lenders take into account:
· You must be caught up with your loan
You must be paying the monthly car payments on time, as it will help you qualify for refinancing
· Your car must have equity
Having negative equity means that your vehicle is worth less than what you owe on loan. You will have to wait for equity to refinance your car.
· Refinancing fleet vehicles are not permitted
You can only refinance vehicles that are used for personal errands only. Therefore, you can’t refinance vehicles that are used for business.
Lower your monthly payments with refinancing
Keeping in view the goal to lower monthly payments, you can follow these two methods to do so through refinancing:
· By finding a loan with a lower interest rate
· By extending the loan term
There are two options, but only one of them really saves money.
The first method, refinancing with a loan with a lower interest rate, helps a lot. It serves a double function and allows you to save money from the monthly payments and the overall auto loan as well. However, when you decide on extending your loan term, you end up paying additional interest charges for every extra month. Stretching out the loan period does help with the monthly payments, but it isn’t effective for saving up from the entire loan.
Refinancing allows you to return back to make large payments once you become financially stable. And you can also change the amount of interest you have paid when it becomes possible.
Conclusion
Since we have explained how the refinancing process goes, you must know your available options. Start looking for a suitable lender and loan offer and save cash from your monthly payments. However, if you think that refinancing is not the best option for you, consider trading in your car with something more cost-friendly.
CarLoanRefinancing is connected with hundreds of dealerships spread throughout the nation. We will provide you with the best refinancing resources and guidance that is unparalleled to whatever is in the market. We also try to make refinancing workable for credit-challenged people.
To start working with us right away, fill out our easy auto loan request form. We will make your match with someone really close.