Very few people enjoy a trip to the bank when it involves discussing a loan. Most car loans are never refinanced, but in some instances, this is necessary. When you need to refinance your car, a few helpful tips can make it a much less stressful experience.
Know why you want to refinance the car.
Your lender will want to know this information to help with the loan assessment. You may be choosing to convert your car loan to a home equity loan to get a better interest rate. It may be that you need to get some cash from your car if you made a large down payment and now have some equity in the vehicle that exceeds the amount of the current loan. Your financial situation may have changed, and you need to extend the length of the note to reduce the monthly payments. Be prepared to defend your reason for refinancing and your ability to repay the loan.
Call several lenders for the best rates if your credit is good.
Refinancing means a used car loan. Loan interest rates on used vehicles can vary dramatically. Depending on the age and condition of the vehicle and your personal credit rating, you may discover rates that are five to ten percent apart. The bank that you do the most business with will usually offer you the better rates if you are considered a good customer and risk. However, you should check with at least three or four lenders before making a decision.
Ask about loan origination fees when you are checking interest rates.
Not all loans are created the same. Some banks charge a percent of the amount borrowed for their application and processing fees. Other banks will use set dollar amounts for these fees regardless of the amount of the loan. Depending on the size of the loan, you may find one type of fees much better than the other for your needs.
You also should ask if there are any early payoff fees.
Some banks do not like it if you do not pay the loan off in the prescribed number of payments. Since the bank will lose some interest earnings, they may add on an extra fee for the privilege of paying off your car a few months early.
Expect a big jump in your car loan interest rates if your original loan was on a new car.
With new cars being financed for extremely low or even no finance charges, it is all but impossible to keep that rate when you refinance the car. You will want to make sure that you understand what the new car payments will be after this new and higher interest rate is added on to the cost of your monthly payment. If you are refinancing to lower the car payment, you may find that this is not a good option for you. If you bought a used car, it will probably be a similar rate that will result in the type of payment adjustment that you are seeking.
Check with the new lender ahead of time so that you will know what type of documentation to bring along when you go to their offices.
If you have completed the application at home, it is possible that you have already provided them with everything but your signature on the final documents. However, in other cases, they may need some personal documentation like insurance cards, driver’s license, and other papers to complete the loan process. It is likely that the loan officer may to see the vehicle before the loan can be executed.