The basics on auto refinance.

Auto Refinancing 101

If you have never refinanced a vehicle before, you might be at a loss as to how the process works. Before you get into your refinance, why not check out just what is going to happen. Let us help you learn the basics and what you can do to make everything go smoother.

Refinancing your vehicle is a simple process that consumers use to save money or lower their payment. The biggest reason to get a refinance loan is to capitalize on an increased credit rating. If your score has increased significantly sine you got your auto loan, you may now qualify for a lower interest rate. Another reason to look into refinancing is if you used the dealership finance department. Dealers profit off of the financing that you receive through them and you might be able to qualify for a cheaper rate going outside of their finance department.

Starting Your Refinance

The first step is to get a quote for your refinance. The lenders will review your application and decide what kind of rate to offer you. You can start the process with the help of Loan Monkey. Just click here to see how you can start the refinance process.

Besides your credit and work history, lenders will also be looking at the vehicle in question. They will look at the age and mileage of the vehicle to get a value. They will then look at how much you still owe and come up with a Loan To Value ration.They will use this information and your personal information to come up with an interest rate and decide if they want to make you an offer.

Once you have your offer and you decide to accept it, you will need to turn in all of the needed documents. This will vary from lender to lender but some of the things that you may need to provide are pay stubs, bank records, vehicle insurance and registration. You may also need to sign a power of attorney. The POA will allow the lender to transfer the title from the old lender to them.

Once the lender has everything they need, it can take a few days or a few weeks to complete the process. Make sure that you stay up on your payments because you still could get hit with a late pay if you allow it to go over thirty days. Refinancing is not an excuse you can use to make a late payment. Your old lender will still report negative information on you.

Making The Most of Refinancing

If you want to get the absolute best deal when refinancing you need to be proactive. You are already on a good start by doing some research in advance, so let’s look at the things that you can do to get a great rate and really drop that car payment amount. These are things that can also help you even if you need a loan with bad credit.

  1. Look at smaller banks.
    You might think that the big banks are the only way to go but this is not always the case. The big banks have a large advertising budget and name recognition. This means that they do not necessarily need to offer the lowest rates to bring traffic in. You might get the lowest rates by using a small bank or local credit union. In the case of the credit union, yes, you need to be a member. Becoming a member usually only involves making a small deposit to open an account, as little as $25. You will save far more than that in most cases, in interest. Plus you can withdraw the money when your loan is done if you do not want to keep the account.
  2. Do your due diligence.
    This means shop yourself around. You should check out several lenders to see who will offer you the best rate. Don’t worry about all of the inquiries. When a lot of inquiries hit your report at about the same time, the bureaus assume you are shopping for the best rate. You will not get penalized as if each one was you looking for a separate account.
  3. Be realistic about refinancing.
    Refinancing your auto may or may not be for you. If you already have a good rate, you are not going to get much out of dropping it a half percent or so. If you can save several  points though, the hassle might be worth it.
    Refinancing might be the right choice is your credit has improved or interest rates have gone down since you first financed. It also might be for you if you need to stretch out your loan to lower your payment. In addition, refinancing a loan is a great way to get a co-borrower off a loan in cases of divorce or when your credit has improved that you no longer need a co-signer.
  4. Be persistent if necessary.
    If you get turned down by one lender, do not assume that all lenders will turn you down. All lenders have different credit criteria. It might not have even been your credit that got you rejected. Some lenders will not finance vehicles from certain automakers or vehicles that are beyond a certain age or mileage. It never hurts to try again if you really need to refinance or if you are sure it will help your rate.
  5. Pull your credit before you apply.
    Just because you have made your payments on time over the last few months does not mean that everything is all peaches. There could be mistakes on your credit report. Mistakes that could keep you from getting a good rate.
    Check out free services like Credit Karma that help you get free access to credit reports. They also make it easy for you to make disputes. Do this at least two months before you plan to refinance. If there are errors, it would take that long to get them fixed.
    In addition to Credit Karma, which will give you access to Equifax and Trans Union, be sure to check out Experian’s website. They have a free program with a great perk. They allow you to take credit for utility payments to raise your score. You just have to give them quick access to your bank account so that they can look for on time payments.

Key Advantages To Refinancing

  • You can lower your interest rate. 
    Lowering your interest rate can cut your payment and/or allow you to repay your loan much faster.
  • You can stretch out your loan.
    If your finances have changed and you must lower your payment, a refinance can allow you to stretch out your loan, even if your rate does not go down.
  • You can remove a co-signer.
    If your situation has changed and you need to remove another person from the note and the vehicle title, this is a great way to do it.
  • You can skip a payment.
    It takes a bit of time to process a refinance which usually means that there will be a delay before your first payment. This is essentially like skipping a payment.
  • You can escape a bad lender.
    Some lenders are just nasty to work with. They have rude customer service, bad websites and just make the whole experience awful. You can refinance your auto and escape them.
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