Common car refinancing mistakes to avoid Advertiser Disclosure Advertiser Disclosure We are an independent, advertising-supported comparison service. Our goal is to help you make better financial decisions by providing you with interactive financial calculators and tools that provide objective and unique content. We also allow you to conduct your own research and evaluate information for no cost and help you make financial decisions with confidence. Bankrate has agreements with issuers such as, but not restricted to, American Express, Bank of America, Capital One, Chase, Citi and Discover. How We Earn Profit The products that appear on this site are from companies that pay us. This compensation can affect the way and where products are displayed on this website, for example for instance, the order in which they may be listed within the categories of listing and other categories, unless prohibited by law. This applies to our loan products, such as mortgages and home equity and other products for home loans. This compensation, however, does not influence the information we provide, or the reviews appear on this website. We do not cover the entire universe of businesses or financial offerings that could be available to you. Tom Werner/Getty Images
3 minutes read. Published on February 24, 2023.
Writer: Rebecca Betterton Written by Auto Loans Reporter Rebecca Betterton is the auto loans reporter for Bankrate. She specializes in helping readers with the ins and outs of securely taking out loans to purchase an automobile. Written by Rhys Subitch Edited by Auto loans editor Rhys has been editing and writing for Bankrate since the end of 2021. They are passionate about helping readers gain confidence to control their finances with precise, well-researched, and well-written information that breaks down complicated topics into bite-sized pieces. The Bankrate promises
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You can find refinancing guidelines on the lender’s websites or Bankrate’s .
2. Do not contact your current lender initially. Although your current lender might not offer the lowest interest rates, it is still the best place to begin. Before exploring refinancing options outside your current lender It is recommended to approach them and explain your situation to determine if they are able to assist. Some lenders offer this, which alters the terms, the due date for payments or the interest rate to provide borrowers with financial relief. Bankrate tip
Even if you don’t follow the process of refinancing your loan there is a chance that they’ll offer an offer that is better than what a new lender could.
3. Intending the loan term too long Refinancing aims to save money, but should you extend your loan to a large extent and you are spending more over the loan’s lifetime. While it could mean a lower monthly payment, you will also pay more interest. Tip from Bankrate
Before adjusting your term make use of auto refinances to make sure you are saving money.
4. Do not take your credit into consideration Like most situations with financing, your credit score serves as the main factor for approval. Thus, improve it and prior to refinancing your loan. You’ll be more likely to receive the available and leave with more money in the end. loan overall. If your credit score is 670 or greater usually qualifies for borrowers with the highest interest rates. Tip from Bankrate
Check your credit ahead of loan applications by using AnnualCreditReport.com.
5. Just shopping with one lender As you would in the process of obtaining your first auto loan We suggest comparing at least three different lenders. So, while signing off on the initial loan offer may be appealing, not all loans are made equal. The lower your interest rate the more you’ll save on the cost of your car. It is important to make sure you’re getting the best deal out there. Tip for banks
Compare the rates currently offered by a range of lenders. Pay close attention to the eligibility requirements, repayment options, and how they compare to the current loan.
6. Becoming upside down on your loan Before refinancing, check whether the equity on your car is with an . Equity is the amount at which the value of the car is higher than the amount you owe for the loan. If you are owed more than what your car is worth or you have equity that is negative refinancing your loan is probably not a good idea. Bankrate tip
Don’t make a deal to refinance a vehicle that you aren’t able to afford. Find out where you may be overextending and estimate the costs before signing off on an additional loan.
7. Giving up after your first rejection loan refinancing guidelines differ between lender to lender Therefore, the fact that you’ve been rejected by one doesn’t mean that you’ll be rejected by all. If you’re asking, “Why can’t I refinance my vehicle?” you have the right to inquire with your lender in accordance with the (ECOA). They have to explain why your application was not approved. Bankrate tip
Knowing why you were denied will improve your chances of being approved in the future. For example, if your credit score is low You can work towards improving it before applying again.
The bottom line: While refinancing your car loan is not without risk, it is a great way to lower the cost of your monthly payments and keep paying for your car. Make sure to keep these mistakes in mind and stay up to date on current for you to be sure you leave with the best loan to meet your needs.
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This article is written by Auto Loans Reporter Rebecca Betterton is the auto loans reporter for Bankrate. She is a specialist in helping readers to navigate the details of taking out loans to purchase cars. Written by Rhys Subitch Edited by Auto loans editor Rhys has been editing and writing for Bankrate from late 2021. They are committed to helping readers gain confidence to take control of their finances through providing precise, well-researched and well-informed information that breaks down complex subjects into bite-sized pieces.
Auto loans editor
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