How to Get an Auto Refinance Loan

Vehicle Refinancing can Save a Car Owner Thousands on Interest

Oct 1, 2009

Insured car owners can refinance existing auto loans in order to get lower monthly repayments. How to go about getting an auto refinance loan.

An auto refinance loan means applying for a loan that will pay off the existing auto loan and taking out a new loan with better interest or terms. It is similar to mortgage refinance but is generally a quicker and less complicated process.

Taking advantage of low interest auto loans can result in saving a lot of money on interest payments.

When to Consider Vehicle Refinance

Anyone paying above 5% annual percentage rate (APR) on their vehicle should consider refinancing. Even paying 1% less interest will result in considerable savings over the term of the loan.

A car owner with a bad credit history, paying a high APR should make it a priority to try and get a better deal. He or she may still have to pay a higher rate but there is a big difference between paying 21% APR and 7% APR. It is not as difficult as it may seem for individual with a bad credit to get an auto refinance loan and there is nothing to lose by asking for free quotes.

If reducing the amount of interest is the primary concern of the insured, he or she should consider an auto refinance loan with the same or reduced term as the existing loan. If a smaller monthly payment is the main goal, the insured should consider extending the term remaining on the existing loan. (The total interest payable in this case will be greater although monthly payments will be less).

Car Refinance Loans – Where to Apply?

Search online to find a reputable new lender or call banks directly to find out if they offer auto refinance loans. Ask about interest rates and fees payable. Check terms and conditions carefully before signing.

The insured should check with the current lender and find out if there will be early repayment penalties and fees. It may still be worth refinancing the vehicle, despite early payment penalties.

If the car is old (older than seven years) or has a value of less than $7500, it may not be worth refinancing and it will be more difficult to find a lender.

A FICO credit score of 600 – 650 is generally the minimum requirement in order to qualify for vehicle refinance, and most lenders will require that there are no judgments against the insured.

The income of the insured will be checked, usually the lender will require proof of a minimum income of $2000 per month.

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