You’ve taken out a loan to purchase your car, and after a year or 2, you’re wondering if it may be worthwhile to refinance the loan. A car refinancing loan is a loan you take to pay off your existing car loan, and refinancing is usually done through a different company.
There are a number of sound reasons why you might be interested in a car refinancing loan:
- Your credit score has improved and you can get a better interest rate
- You can find a better interest rate even if your credit score hasn’t improved
- You need a lower monthly payment
- Your lease is expiring and you want to purchase the car
If any of these situations apply to you, looking into a car refinancing loan is a good option and can save you hundreds, if not thousands, of dollars over the course of your loan.
Here are the top 5 loan marketplaces that can connect you with lenders for auto refinancing loans:
RateGenius is a middleman that connects you with relevant lending companies. It offers a streamlined application process and boasts a network of 150 lending institutions, giving you a good chance of finding the auto refinancing loan that suits your current situation.
LendingTree is a marketplace where you can set your parameters and then receive a list of relevant loan providers. One of the perks of LendingTree is that you fill out one application and can then review multiple loan options.
MyAutoLoan is a lending marketplace that lets customers find the right loan solution for their auto purchasing or refinancing needs. The company has developed proprietary technology that can help them easily and effectively match lenders to borrowers based on their needs.
SuperMoney is an online marketplace that lets users easily compare and qualify for multiple auto lenders in one form. This platform connects users with great deals for auto purchase loans, refinancing, leasing and even title loans.
5. Auto Approve
Auto Approve is a loan aggregator specializing in auto loan refinancing for all types of vehicles, including boats and ATVs. Auto Approve can frequently get you a better auto loan refinancing deal than you could access yourself.
Is Refinancing Your Auto Loan Always a Good Option?
While there are many benefits of refinancing your car loan, it’s not always the best option. If you find yourself in a situation in which your credit score has improved or you want reduced monthly payments, refinancing your auto loan is definitely a good option for you.
However, there are certain situations in which it’s not a good idea to refinance:
- You’re not making ends meet. If you’re in financial trouble, you’ll be considered a high-risk borrower, and lenders will either not approve you, or approve you at a very high-interest rate. In this case, it’s not worth refinancing because you can end up paying more every month.
- Your car is too old or too new. Lenders don’t like offering loans for older cars or new cars that are less than 1 year old. The logic for both is similar: At the point that you’re seeking to refinance, the car has depreciated in value, and you will owe more than it’s actually worth. And because it’s not worth as much as it used to be, a refinancing loan is likely to have a higher interest rate than you’re already paying.
- Your current loan has prepayment penalties. Check the terms of your current auto loan—some come with prepayment penalties, which means that if you refinance, you’ll have to pay the penalty. In some cases, it might still be financially worthwhile, but in other cases, not.
Not Sure if Auto Refinancing Is For You?
If you’re not sure whether you’re in the right position to refinance your auto loan, speaking to a credit counselor is a good idea. Someone who has nothing to lose or gain by your refinancing, and who can direct you on the most financially expedient route.
If your credit counselor reviews your finances and says that an auto refinancing loan is indeed a good option, you now have your work cut out for you in deciding which lender to use. You can start with the above 5 marketplaces since they are known for being reputable and connecting customers with legitimate lenders. In the borrowing and lending business, there’s a lot of scammers and schemers out there, so it’s important to go with companies you can trust.