Auto Loan Refinancing Guide

Is auto refinancing right for you?

Auto refinance is the right choice if you can save money — specifically on incurred interest — or you need relief and can't get your loan modified. But as interest rates continue to rise due to high inflation, determining if it is right for you requires extra consideration.  

Reasons to consider refinancing your auto loan

• Your credit has improved 
  Credit score serves as the primary goal post for the rates lenders will offer you. If your credit has improved since you initially signed off on your loan, it could be worth your while to refinance and receive more competitive rates. 
• To lower your monthly payment
  If your current loan is straining your finances and you're at risk of missing a payment, refinancing may be a good option. Pay close attention to the amount you extend your loan term though, the longer it is the more interest you pay over the lifetime of the loan.
• Interest rates have dropped
  While this not the case currently due to the Federal Reserve’s moves to quell inflation, refinancing is a good idea if interest rates have declined. Keep up with current interest rates to determine if refinancing is a good move. 
• You have dealer financing
  If you initially agreed to dealer financing terms, it is likely that you did not get the most competitive terms. Shop around with direct lenders to lock in more competitive rates. 

Requirements to refinance an auto loan 

Each lender carries its own eligibility criteria when it comes to auto refinance loans. But there are the common requirements you will likely run into. 

It is best to take advantage of an auto refinance calculator that will do the heavy lifting for you. Once you have a handle on how much you could potentially save you begin your refinance process.

What to consider after refinancing your car?

While you can now take a deep breath with a new and improved loan in hand, there is still some important work to be done. These considerations will ensure you stay on top of your new loan. 

Finish up payments on your previous loan. 

Until you get the go ahead from your previous lender it is important to continue making payments on your loan. If an issue arises and you overpay, the lender can likely credit the amount back to you. Once you receive the new loan either you or your lender will handle the final loan payment. Check with your lender to avoid any additional charges. 

Start paying your new loan. 

Payment schedules vary by lender but generally, you will be expected to begin making payments 30 days after accepting the loan. It is wise to set up automatic payments if it is available to prevent any missed payments. Along with this, do not put off any payments in order to avoid any building interest. If you feel yourself heading into a precarious spot contact your lender and explain the situation before it gets too late.