April 23, 2018
By Mary Beth Eastman

How to Refinance a Car Loan

Simple. Thrifty. Living.

An estimated 107 million Americans currently have loans that they used to purchase vehicles. Many of those people may not known how much car they could afford or didn’t get the best interest rates, so they want to refinance their loans to make their payments more affordable.

If you want to refinance your car loan, then you’ll need to know the right approach to get approved.

Before you refinance your auto loan, you should learn the details of your current loan. If your contract includes prepayment penalties, then you need to determine whether you will save money by refinancing. In some cases, the prepayment penalty may exceed your potential savings.

Lenders won’t want to refinance your loan unless you have good credit, so you might as well get your credit report before you start exploring your options. If you find inaccurate information on your credit report, you should contact the credit bureau about removing it.

Financial institutions typically consider credit scores over 700 good and scores over 750 excellent. If your score falls below 700, you should work on improving your credit before you try to refinance your auto loan. If you need to clean up your credit report, there are several reputable credit repair services that can help.

Today’s lenders want strong evidence that you can repay your loans on time. You can prove this to them by collecting documents about:

  • Your income.
  • Your current loan’s interest rate.
  • How much money you owe on your current loan.
  • Your monthly payments.

You should also have your social security number, vehicle identification number, driver’s license and original loan contract.

The internet makes it easy to explore multiple loan refinancing options so you can get the best possible deal. Always compare several offers before you decide which one fits your budget.

Try to submit all your loan applications within 15 days. Credit bureaus may lower your credit score when institutions request information. If you keep the inquiries within a 15-day period, though, they get grouped together and don’t affect your score as much.

Refinancing an auto loan can help you lower your monthly payments, avoid excessive interest and own your vehicle sooner. As long as you take a sensible approach to refinancing, you should find that you can meet your goal.

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