by Jim Thompson |
Last Updated: January 11, 2021 Why Refinance?
People refinance cars for a number of reasons. They may want to lower their monthly payments or find a loan with a more favorable interest rate. Others may want to change the length of their loan to shorten or lengthen it depending on their financial situation. Still others desire to remove or replace a co-signer.
In some cases, it may be advantageous to restructure your loan by buying a new car. If your current car still has enough residual value that a trade-in would net close to what you owe, you can save money on monthly payments. This is particularly the case if you choose a less expensive car. Even if this means you roll part of your first loan into the second, it can still work to your advantage.
Know Your Note
On the other hand, if you are satisfied with the car that you’re in but dissatisfied with how much you are paying every month, you may find a lender willing to refinance your loan. As with getting any auto loan, the first step is to determine your overall goals. Once you are clear as to what these goals are, you will want to check your credit just as you would with any loan. There are several sources from which you can receive a free copy of your credit report, places like annualcreditreport.com. You should get a full copy of your credit report because lenders are only going to look at your credit score. Mistakes on your credit report can affect this number negatively, you will want to correct any mistakes before you go shopping for a loan.
Know Your Car
The next step is to know your car. It is not enough to know just what make and model or engine size or the number of doors that your car has. The lender wants to make sure that your car is in satisfactory shape and wants its true history so that they can decide if your loan will be worth the risk. Two big facts you should know going in are the VIN number of the car and its mileage.
During the refinancing process, it is time to consider if you’d like to roll any additional products into the note. These things might include extended warranties, gap insurance, etcetera. It is also very important to remember that during the refinancing process that your original loan is still in effect. Don’t get so caught up in doing the paperwork and the due diligence required to acquire the refinancing loan that you fail to honor the commitment you made to your first lender.