Do you wish to improve your credit score? It is a fact that paying off a bad credit auto loan helps, and you will be left with an improved credit score. Do you also desire to lower your monthly payments? Well, then there is only a single way to do so, refinancing. Here, we have guided you on all the preparations you will be making and how to qualify for auto loan refinancing.
Steps To Refinance A Car Loan
The first and foremost step is to make sure that at least a year has passed since you took out the car loan. Lenders get impressed when they see you keeping up with your monthly payments. It gives them an idea about your credibility and that you are serious about completing the loan in a timely manner. In addition to timely payments, you must also have an improved credit score. Usually, it takes a year or more to build your credit score, mainly depending on what the starting point was.
After utilizing a year to better your credit score, you should be ready to take the next step and consider refinancing. In order to refinance, you must follow the given steps in order:
1. Take a look at your credit.
Before reaching out to a lender, you must know about your credit score and what’s inside your credit reports. In case your credit union, bank, or credit card provider doesn’t give you an option to check your FICO credit score, then check your auto-enhanced FICO credit score online for free. Through this option, you also get a free copy of your credit reports every 12 months, through the top three major credit-related bureaus, including Equifax, TransUnion, and Experian. After getting the credit reports, check every detail thoroughly, and in the case of any error, contact the bureaus right away.
2. Find out the current interest rates.
The government-owned Federal Reserve is responsible for setting bank interest rates. The lenders also set their rates on it, but it may fluctuate a little. Before refinancing, check out what are the current rates in the market and decide accordingly. It will help you cooperate even if the rates are higher than what you expected.
3. Collect vehicle and loan information
It is necessary for you to know your car. It means that you must have an idea about the vehicle’s identification number (VIN), model, year, age, mileage, and other details. You can check your car’s worth by using evaluation tools online. In addition to this, you must know your current loan, meaning its interest rate, length, monthly payment amount, and the loan’s term.
4. Request a payoff quote
Once you become satisfied with your credit score and have enough information on current interest rates, consider requesting a 10-day payoff quote from your original loan’s lender. The payoff consists of a prepayment penalty and additional interest charges. Then, you should find the difference between your car’s value and the payoff amount. If the figure happens to be more than the car’s value, then you have negative equity. To refinance the auto loan, you must pay off negative equity.
5. Shop around
After completing all of the steps given above, start rate shopping. It is the best means to find the right lender offering the best deal. Consider reaching out to your current lender before finding another lender because they may have a better offer for you. Every lender has different requirements, so you must fit in those to further initiate the refinancing process. Usually, lenders reject vehicles older than ten years or have a mileage above 100 000 miles.
Can’t figure out the last step?
If you have gone through every step, but can’t find the right place to refinance, consider us. We, CarLoanRefinancing, are connected with many lenders nationwide. We also have all the resources to handle unique credit problems.
Fill out our cost-free online auto request form, and we will reach out to you right away!