When a person finances a car for the first time, it may have been done through the car dealer or through a financial institute without going into more details about the competitive interest rates and other alternative institutes giving better interests. At the same time, following buying a car using a car loan the federal interest rates may have dropped and as a result the present car loan interest could have also fallen. However, the benefit of such a drop in the interest may not materialize for the buyer as the contracted interest rate will prevail for the entire duration of the loan. In these instances, the car owners have another option and this is what is known as ‘refinance car loan’.
When looking at the car refinancing market, experts agree that not many are going for refinancing even when the interest rates fall, mainly because of their lack of knowledge relating to the necessary steps of obtaining such a loan. However, in this day and age, the technology has made matters simple and choosing the best deal and applying for a refinance loan do not have to undergo the same hassle as it did earlier and some argue it is rather simple than obtaining any other loan such as a housing loan.
First step – shop for best deal
The first step in the process is to search the web for the best deal in ones state and compare it with the present interest rates of the car loan. If it proves to be beneficial, the next step is to find out what paper work needs to be done in relation to the refinancing process.
Second step – understand the documents necessary
Many institution web sites will post the instructions as to what are the documents required, the time taken to process and the fees involved in closing the deal. In most instances, one may have to submit the documents stating ones financial status, the income, assets, present debt, and credit worthiness.
Third step – hand over the application and relevant documents
The submission would require filling up a form which may take only 10 minutes and hand over to the financial institution with other relevant documentation. If approved, one can proceed with paying the necessary fees.
Fourth step – pay off the existing loan and transfer the title to the new lender
Once the deal is done, the new lender will pay off the existing loan and the title of the car will be transferred to the new lender. From this point onwards the person obtaining the loan has to pay the monthly installment to the new lender according to the new interest rates agreed upon by both parties.
Fifth step – enjoy the new refinance plan
If the process is complete, the buyer will now be able to enjoy a lower interest rate, a lower monthly installment and a loan adjusted to the present market value of the car instead of an inflated amount which was present when the initial loan was obtained.