Not everyone qualifies for low interest rates on auto loans. Bad credit borrowers often have to settle for high-interest dealer loans. An auto refinance loan allows you to get a new loan to replace your current one, which usually gives you a lower monthly payment and a lower interest rate. And while this may seem like the right move, researching how to refinance a car loan can help you make up your mind.
We at Home Media review team will explain how car refinancing works and tell you the factors worth considering before getting a new loan. We will also provide recommendations for lenders that offer the best auto refinance rates in the industry by 2022.
4 steps to take to replace your current car loan
Auto refinancing generally follows the same process as obtaining a loan for a new car. It’s important to review your finances and the terms of your original loan to decide if auto refinancing is right for you. If that’s the case, your next step is to look up auto loan rates and compare your options.
Below, we provide detailed information on four steps to refinancing an auto loan.
1. Decide if refinancing your vehicle is the right decision
Refinancing your auto loan makes sense if you can get a lower interest rate and monthly payment than you currently have, but it may come at the expense of getting a longer-term loan. Extending the term of your car financing could lead to you paying more interest overall.
Here are some things worth considering in your decision on When to refinance your car loan:
- Your credit score: If you have bad credit, work to repair it before trying to refinance your auto loan. This is because your credit history will affect whether you qualify for auto refinance and the rate and terms you are given.
- How long have you had your car loan: Wait six months to a year after your loan term begins before applying for refinancing. This should give your credit score enough time to recover from the hard credit inquiries that were made when you got your original loan.
- The economy and interest ratesNote: You won’t be able to maximize your vehicle refinance yield if interest rates are skyrocketing. Wait until they start to drop to make sure you get the lowest APR and monthly payment possible.
2. Gather all the necessary documentation
Applying for a refinance on your auto loan is similar to applying for a new loan. During the application process, you will need to provide documentation to verify your identity and creditworthiness and the value of your car.
You must prepare these documents before applying for an auto refinance loan:
- Personal information: Have your driver’s license, address, phone number, Social Security number, proof of income, and proof of insurance available when you apply.
- vehicle information: Have your vehicle identification number (VIN) and the year, make, model, and registration number of your car ready for the lender.
- Current loan details: Gather information from your current lender, your account number, and existing payment amount.
3. Shop around and compare lenders
Each lender weighs factors differently when calculating auto refinance rates and offers. Start with local banks and credit unions when shopping around. Most financial institutions offer car loans, and you may qualify for special discounts at the bank you’re a member of. Once you have those rates in hand, compare them to offers from other lenders to get a better idea of which one offers the best deal.
4. Accept the offer
Auto loan refinance offers tend to last one to two months before expiring, which means you can take your time evaluating all of your options. Once you sign your new loan, the lender will likely take care of all the paperwork and pay off your old loan directly. Keep in mind that some lenders may pay you directly and ask you to wire the funds to pay off your loan balance.
Typically, you’ll start making monthly payments to your new lender within 30 days.
What to consider before refinancing your car
Because each financial institution is different, you may face different requirements and fees that could affect your vehicle refinancing. Here are some factors worth considering:
- Prepayment Penalties: This is a fee that is charged if you pay off your loan early. Not all financial institutions charge this, but it’s worth checking as it could cost you.
- Remaining time on your loan: If you’re close to paying off your loan, refinancing your car may not be worth it.
- your financial situation: Lenders will look at your debt-to-income ratio when you apply for a refinance car loan. If you owe a lot of money on credit cards or personal loans, pay off your debt early for better payment terms.
Our recommendations for car refinancing
Auto refinancing can help you get a lower rate and lower loan payments. But finding a new, reliable lender can be difficult if you don’t know where to start. We recommend contacting Auto Appprove and myAutoloan to discuss your existing auto loan and submit loan applications.
Automatic approval: the best option for refinancing
Unlike most lenders, Auto Approve specializes in auto loan refinancing. The company offers a lot of flexibility, working with a network of lenders to provide refinancing for the following types of vehicles:
- Standard cars, trucks and SUVs
- all terrain vehicles
With automatic approval, qualified borrowers can receive refinance rates as low as 2.25% APR. The lender has a solid reputation as a financial institution. The business is accredited by the Better Business Bureau (BBB) and has a A+ rating of the organization
read more: Automatic Approval Review
MyAutoloan: The Best Low Rate Option
The myAutoloan online marketplace allows you to compare offers from lenders in one place. With auto loan refinancing, borrowers with good credit can find APRs as low as 1.99% for a loan term of 36 months or less. Those with less than ideal credit can also refinance their auto loans through myAutoloan since the company’s minimum credit score is 575.
Within the auto loan industry, myAutoloan has favorable ratings. The market has a A+ rating from the BBB and is accredited by the organization. Trustpilot customers give the company an average of 4.3 stars of 5.0.
read more: myAutoloan review
Because consumers trust us to provide factual and accurate information, we created a comprehensive rating system to formulate our rankings of the best auto loan companies. We collect data on dozens of loan providers to rate businesses on a wide range of ranking factors. The end result was an overall rating for each vendor, with the companies that scored the most points topping the list.
Here are the factors our ratings take into account:
- Reputation (30% of total score): Our research team considered the ratings of industry experts and each lender’s years in business when awarding this score.
- Availability (20% of the total score): Companies that cover a variety of circumstances are more likely to meet borrowers’ needs.
- Loan details (15% of total score): We consider each lender’s types of loans, term lengths, and available loan amounts to determine this score.
- Rates (25% of the total score): Low APR auto loan providers scored highest in this category. Available discounts were also taken into account.
- Customer experience (10% of total score): This score is based on customer satisfaction ratings and transparency. We also consider the responsiveness and availability of each lender’s customer service team.
*Accurate data at the time of publication.