What is Auto Refinancing?
For many customers, an auto loan company can be an added stressor on top of an already complex situation. Making a major spending decision on a car can be difficult, and entering long-term debt is a choice customers should always make after careful consideration. In many cases, borrowers do not receive the most favorable terms for their loans due to a variety of factors. These can include existing debt levels, poor credit, or even signing for a loan at the same place where an you purchased your car.
While the situation may seem challenging for customers saddled with high interest rates and unrealistic payment schedules, there is a mechanism available to improve your financial situation easily. With the best auto refinancing rates and good car refinance companies, customers can take out an extra funds to cover the full amount of your existing debt while getting better repayment terms and the lowest auto refinance interest rates you can qualify for.
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 best auto refinancing loan to suit your current situation.
Professionals help find the best refi rates
No new or pre-owned loans
Straightforward and quick application
Focuses exclusively on refinance
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.
Accepts almost every type of vehicle
Doesn't fit bad credit borrowers
Wide lender network of financial institutions
Does not offer purchase loans
Why Consider Refinancing Your Car?
There are many reasons why customers can and should look to refinance your existing auto loans. By improving the terms of your car financing, you can relieve stress, lighten your financial burden, and save money over the long run by avoiding paying unnecessary high interest rates. These are just some of the reasons customers can refinance their car loans:
- They received suboptimal terms on their original auto loan: This is a frequent problem many auto buyers have when applying for financing. Most people are happy to have their car dealer act as their lender, and are willing to forgo better terms for the sake of convenience. Loans extended by vehicle dealerships tend to have less favorable terms and higher interest rates than those originated by a bank or an alternative or online lender. These kinds of loans also include extra riders and fees that may be hidden and eventually raise the overall loan costs.
- Interest Rates Have Fallen: It is not uncommon for overall lending and financial conditions to change over time. In many instances, customers may have taken out an auto loan at a time when economic conditions were difficult, leading to higher interest rates. In these cases, a refinancing auto loan can ease the financial impact of the existing loan without deepening existing debt or overpaying for a loan.
- Borrowers’ Creditworthiness Has Improved: For some customers, a vehicle is a necessity regardless of their creditworthiness. This can lead to borrowers accepting higher interest rates and weaker terms when purchasing their car. However, over time, credit scores can be improved and customers can make great strides towards restoring their personal finances. Once you've managed to boost your credit score and are no longer looking for a car loan with bad credit, you can refinance your loans to gain more favorable terms and better interest rates. In the long-term, this refinancing could potentially save thousands over the life of your auto loan.
- Customers’ Financial Conditions May Worsen: In a few cases, customers who have seen financial situations deteriorate since taking out the original car loan can be faced with payments that were once realistic but have turned unfeasible. In these situations, you can seek to refinance your loans to extend repayment terms and lower the amount you must pay every month.
What Does It Mean to Be Upside down on a Car Financing Loan?
Cars depreciate quickly, as much as 20% or even more when you drive them off the lot. When someone is “upside down” on a loan, it means they owe more on the car than the vehicle is worth. Being upside down on the loan means that you can’t recoup what you owe on the loan by selling the car (although with depreciation you may be in this position anyway). One way to avoid an upside down loan is to pay a bigger down payment, which will also result in lower monthly payments. If possible, you should try to keep driving the car long after you’ve finished paying it off, to make up for the negative equity.
Factors That Impact Auto Refinancing Options
Before choosing to refinance your car, it is important for borrowers to take stock of their current loan and determine the various factors that can affect their ability to get the most favorable terms possible. Before signing on a refinancing loan, customers should always contemplate the following:
- Refinancing Requirements: When looking for refinancing loans, customers should always be aware of their preferred lender’s requirements to extend funds. These requirements can include a minimum amount of outstanding debt, remaining time on an existing loan, or conditions specific to the vehicle being refinanced, such as total number of miles or age of the vehicle.
- Current Income: Customers that have improved their financial standing in the years since their original auto loan was issued may seek refinancing to pay off their loan quicker or improve their interest rates. On the other hand, customers whose income has decreased since purchasing their car could potentially utilize refinancing to extend their repayment term and lower their total monthly payments to more feasible levels.
- Remaining Payments on Original Loan: In some instances, extending the terms by refinancing an outstanding loan can result in lower payments, but cause the overall amount remaining to rise if interest rates did not change significantly. For customers with shorter remaining repayment terms, refinancing may only make sense if they can decrease their interest rates without significantly adding to the duration of the loan term.
- Credit Scores: Depending on changes in your credit scores since the time of your original loan, certain borrowers may benefit from auto refinancing.If your credit has improved, you can refinance your bad credit car loan to one with better interest rates and more favorable repayment terms.
How to Refinance a Car Loan
Finding a great auto refinancing loan can be an incredibly easy process if customers are thorough when applying for this option. To find the best auto refinance loan, customers should always take these steps:
- Get Everything in Order: The first step towards finding the best auto refinancing loans with the lowest rates available is to be prepared. This includes setting a budget, checking your credit scores, and repairing them if necessary. In addition, collect all the most up-to-date paperwork on both the car and the loan being refinanced. Finally, determine the ultimate goal of refinancing the outstanding loan.
- Find the Right Auto Financing Solution: While many customers may lock themselves in to a dealership loan when first purchasing a car, auto refinancing is offered by a wide range of banks, financial services providers, and alternative lenders. Customers should always be thorough during the search for the right refinance lender, looking for reliable lenders that have a proven track record, offer the terms and rates you're looking for, and demonstrate a willingness to work with borrowers on your terms.
- Choose the Best Available Lender: Once a potential lender list is narrowed down, borrowers should take some time to ensure that the lender they choose is one that can check off all their requirements for a new loan. This includes delivering the right interest rates and terms, assessing the most competitive fees, and exhibiting a strong reputation.
- Prepare all the Documentation: Once customers have chosen and been prequalified for a refinancing loan, they will be required to present a series of documents that include identification, proof of income, documentation on the car along with details on the loan being refinanced. You can speed up this processby having this documentation ready to submit.
- Pay the Lender and Start New Repayment: Once approved and completed, the final step for a borrower is repaying the remaining balance on the original car loan debt before beginning to repay the new refinancing loan. This can be done either by the customer after receiving the total amount of the new car loan, or in some cases, may be handled automatically between loan providers.
Find the Best Auto Refinance Companies
No matter the reason to do so, an auto refinance loan can offer excellent value for borrowers seeking to improve your repayment terms and guarantee you can fully repay your auto loan without breaking the bank. By refinancing, customers can lower your monthly payments, reduce the total amount you pay by lowering car loan interest and consolidation debt from other loans, or adjust the duration of the loan repayment period. For any situation, narrow down the best auto refinance loan lenders with our in-depth reviews, expert research, and fair comparisons.
* Your loan terms, including APR, may differ based on loan purpose, amount, term length, and your credit profile. Rate is quoted with AutoPay discount. AutoPay discount is only available prior to loan funding. Rates without AutoPay may be higher. If your application is approved, your credit profile will determine whether your loan will be unsecured or secured. Subject to credit approval. Conditions and limitations apply. Advertised rates and terms are subject to change without notice.
Payment example: Monthly payments for a $10,000 loan at 3.49% APR with a term of 3 years would result in 36 monthly payments of $292.98.
** All loans made by WebBank, Member FDIC. APR is the Annual Percentage Rate. Your actual rate depends upon your individual credit score and other key financing characteristics, including but not limited to the amount financed, term, a loan-to-value (LTV) ratio and other vehicle characteristics. Available APRs range from 2.24% to 24.99%. Best APRs are available to borrowers with excellent credit. Advertised rates are subject to change without notice. Vehicle restrictions: Auto refinancing through Lending Club is only available for vehicles that are 10 years old or less and have 120,000 miles or less. Refinancing is not available for Hummer, Pontiac, Saturn, Daewoo, Isuzu, Suzuki or Oldsmobile vehicles. Refinancing is not available for diesel Volkswagen vehicles, Dodge Neons, or any commercial vehicles. Existing loan restrictions: Auto refinancing is available for existing auto loans that have been open for at least 2 months, have 24 months or more remaining on the term and have $5,000 to $55,000 in outstanding balance. Fees: Title and state fees may apply. Additional vehicle and existing loan restrictions may apply, depending on credit quality.