Refinancing your auto loan can give you savings, but you will have more savings if you do it the right way. Make auto refinance most advantageous for you by following the five tips below:
1. Review the details of your existing auto loan
Before you consider refinancing, take a look at your existing auto loan first. Check how much you are paying in interest, how long you will still be making payments, and how much the payment is worth. You must know all these details because you will be asked for these when you apply for a new loan. Also, see if the contract includes a prepayment penalty. If you will be penalized for paying off your original loan sooner, you should definitely rethink refinancing.
After familiarizing yourself with the details of your loan, find out if your vehicle qualifies for refinancing. Each lender has its own set of requirements, but most banks will not refinance vehicles that are over seven years old, has a remaining balance less than $7,500 and has 100,000 miles or over.
2. Check your credit
You would save the most money if you refinanced your auto loan at a time when your credit has improved. If you have taken steps to improve your credit after you obtained your original auto loan, you should pull your credit report and get your score to see the results. Get a free copy of your credit report from each of the three credit bureaus and pay a few dollars to obtain your scores. When you know your scores, you will have an idea of what auto refinance rate you will qualify for. If your credit needs some work, take time to repair it before you apply for the new loan.
3. Use an auto loan refinancing calculator
Auto loan refinancing can save one a lot of money, but it is more beneficial to some people. Therefore, find out first if it is the right move for you. Utilize an auto loan refinancing calculator to make the computations and determine if you can indeed save money through a refinance. This online tool, which can be used for free, will allow you to estimate your new monthly payment based on your current loan balance, term and new interest rate.
4. Pick the right lender
There are many lenders in the Indianapolis area that can offer you an auto refinance loan. However, not all of them are right for you. Do research about the lenders in your area. It is important that you find one that gives a low APR (annual percentage rate). It would be pointless to get a new loan if you would still be burdened with a high rate. Shop around to find the lowest rate possible.
Aside from doing research, consult your personal network to find the right lender. Ask family members and friends who have refinanced their original loans about their auto lender. Inquire about the pros and cons of dealing with that specific lender, as well as how much they reduced their car payment and how much they saved overall.
5. Keep the original loan term
When you refinance your vehicle, you have two options: the first is to maintain the original loan term with a lower rate and the second is to extend the loan term. The former option is best, and you should choose it if you wish to get more savings. When you prolong the life of your loan, you lower your monthly payments but you pay off more in the long run.