In situations where managing monthly or annual budget to save money is crucial, refinancing a car could be a great option to serve the purpose.
Many homeowners make a beeline for home refinancing whenever interest rates drop. Indeed, it is a great option, if you spend a whopping amount on monthly payments, owing to very high interest rates. However, many of them also pay hefty monthly payments on their car loans. What they do not know is that they can also get car refinancing in the same manner. If you choose to go for it, you may be able to save hundreds of dollars every month on car loan repayment and thousands of dollars during the tenure. If you are interested in availing this loan, it is necessary to understand how to go about it.
Car loan refinancing means paying off your current loan by getting one from another lender at lower interest rates. For example, if you are currently paying USD 500 towards monthly auto loan repayment at an interest rate of 11%, you may get it refinanced at a new interest rate of say 8%. As a result, your monthly payment amount may come down to USD 400. Thus, you can save as much as USD 100 every month. This amount is high, considering the large span over which a loan repayment is spread. Thus, there is no doubt that it is a great money saver option. Follow these steps to proceed with it:
Get in Touch with Your Current Lender
If you have decided to consider this option, get in touch with your existing lender first, and get a quote on the payoff amount. Remember, pay-off amount is not the same as balance in your loan account. Also, check the expiry date of this quote. If you are going to take long for refinancing, then ask for a further date.
Search for an Appropriate Lender
As soon as you are informed about the plummeting interest rates on auto finance, get in touch with various lenders. Compare their rates and check their criteria. You can get interest rates of various lenders on the Internet, as well. Make sure that the APR (annual percentage rate of charge) is low enough for you to land in a profitable situation.
Apply only in those money lending institutions, where you have a chance of loan approval. Loan denials can have a bad impact on your credit scores. Hence, it is important to check the criteria before applying. Most lenders will demand a decent credit score to be eligible for it. Refinance with bad credit is also available, but then you might have to approach lenders who specialize in bad credit loans.
Fulfill the Criteria
Collect all important documents such as your vehicle’s registration papers, and be prepared with information, including Vehicle Identification Number (VIN), make and model of your car, year, etc. You may need additional documents, such as your account statement, pay stubs, etc., if you do not have particularly good credit scores. Your debt to income ratio can also be assessed in that case. People with less-than-perfect credit scores need to be more patient, as they have to undergo additional scrutiny. They may also not get very attractive interest rates.
Refinancing may not be for everyone. Hence, make sure that you are a candidate for it, before you apply. For others, this can be a great way to get rid of their financial woes.