What exactly is an auto refinance loan?
An auto refinance loan is simply a new car loan that pays off the loan that you
have already taken out on your vehicle. The new car loan will be at a lower interest
rate, for a longer period, or both. The concept is somewhat similar to home refinancing
your but the process isn't nearly as complex and it's usually much faster. Many
people find that after they have left the car dealer they got a good car and a bad
loan. The dealers' finance department often relies on you being so excited about
your new or used car that you aren't really concerned with the auto loan rate you are
getting. Auto refinance allows you to find a better deal without all the added pressure
of being at the dealership and the excitement of the original auto purchase.
Why should I refinance my auto loan?
There are two reasons you would want to
refinance your car loan. The first is to
save money. By lowering your interest rate and not extending the loan length or
term, you save money over the life of the loan. By lowering your monthly payments
you might have some extra spending money at the end of each month or finally be
able to afford your car note payments. The second reason for car refinance is to
lower your car payments by extending the term of the loan. It will take longer to
pay off but you will have smaller car note to pay each month. This option can be
helpful for consumers with bad credit who with to make their car payments more affordable.
Both of these options can be used together to fit your situation.
Does it cost money to refinance my vehicle?
Most reputable lending companies do not charge to apply for auto refinance. There
may be some fees associated with the actual car refinancing but they are usually minor
compared with the amount of money you can save. Auto finance lenders that charge
an upfront fee just to apply should be avoided. Lenders should want to run your
application as it is the only way they are going to get your business and make money
from the auto loan interest rate.
How much money will I save if I refinance my car loan?
Ah, the big question, how much can I lower my car payments though
auto refi. The
amount of money you will save each month depends on many factors. For most consumers
with bad credit and high interest auto loans, lowering the interest rate will be the main factor.
All other things being equal, lowering the interest rate a few points can save thousands
over the life of the auto loan. Another option that can be helpful is to extend the length
of the auto loan. Coupling this with a lower interest rate can drop the monthly car payments
dramatically. Of course you will be paying off the refi loan over a longer period
of time but the lower monthly car payment may make the difference between being able
to afford the car and having your car repossessed. Each situation is unique and the auto loan refinance
lender will work with you to determine what works best for your particular situation.
Do you have to make a down payment?
While requiring a down payment is not a common practice, some finance companies
do require a down payment. If your application is approved this information will
be provided by the lender before you sign any documents.
What is the largest amount I can refinance?
For auto refinance loans the largest amount that can be financed is generally $75,000.
This maximum will vary among auto lenders, however most consumers will find their current
loan payoff will fit into most lenders criteria. As for the minimum auto loan refinance
amount, $7,500 tends to be the norm. Auto lenders must make it worth their time
and expense and usually won't
refinance a car with a payoff less than this.
What amount should I apply for?
It is suggested that you apply for a loan greater than your existing loan that way
you have a bit of flexibility. The extra money can be used for any purpose, although
a good suggestion is to put the money back into the car for repairs or through purchasing
an extended warranty. You want to make sure that your investment is still running
when you make your last payment. This is especially important if you extend the
term during auto refinance as you will be paying off the loan for a longer period
Can I get an auto refinance loan even if I have bad credit?
Bad credit auto refinancing is one of the largest auto refinance segments. Lien
holders make money from the interest on the auto loan and consumers with bad credit
pay higher interest rates. Lenders, therefore, can make more money from people with
bad credit. The trick here is lowering your current interest rate. If you are paying
14% and refi auto can drop the rate to 8%, you are saving a lot in interest and
the new lender is still making a lot in interest. Everyone wins except your old
lender who already charged you too much.
How long does an auto loan last?
How long an auto loan lasts or its "term" depends on your car loan agreement. Common
auto refinance loan terms are 36, 48, 60 or even 72 months. You can work with the lien
holder to find a term that works for you. Remember that the longer the car loan
term the lower the car payments should be.
How long does the car loan refinance process take?
Once you find a lender or a company that's going to help then you have to get approved.
Approval only takes a few minutes or a few hours. If your application is incomplete
or has incorrect information, the lender will contact you to correct the mistakes.
In general, applying for auto refinance is a quick and simple process.
Can I have a co-signer on my loan?
Yes, you are usually allowed to have a cosigner. Matter of fact having a cosigner
greatly increases your chances of getting approved for car refinance. This option
is especially useful if you have bad credit or don't make the minimum monthly income.
Most refi car companies allow you to have a loan co-signer.
Do I have to have car insurance in order to get a loan?
Having full coverage car insurance is a must. Like most auto loans, a car refinance
loan is secured by the vehicle. If the car is stolen, involved in an accident or
otherwise damaged then you would be required to repay the loan without use of the
vehicle or its market value. Lenders know that repayment under such circumstances
is usually too great a burden for the borrower and will have a difficult time being
repaid on the loan. Requiring insurance protects both the lender and the consumer.
Minimum Auto Refinance Loan Requirements
In order to be considered for autorefi many auto loan lenders require that you meet
the following criteria:
- Be at least 18 year old.
- Posses a valid drivers license
- Current US Citizen
- A yearly salary of 26,000 or a cosigner
- Have proof of current auto insurance
Study the Facts
If you are thinking of saving money through
car loan refinance you will want to
study the facts and do the research necessary to find the auto refinance situation
that's right for you.
Good luck and happy saving.
- You need to consider your needs. Ask yourself: How much will I need to pay off my car loan? How long will I need this loan to last? Will my car be finished before my car payments are?
- Research auto loan refi companies, both online and off.
- Make your decision and start saving your hard earned money.