Although auto loan refinancing is a great way to lower car payments and save money, few people consider this option. Car buyers refinance their auto loans for several reasons. Is the current interest rate or APR high? Maybe you accepted a bad car loan because of a dealership’s scam. Whatever the reason, refinancing an auto loan is perfect for lowering payments and paying off the car sooner.

How Auto Loan Refi’s Work

Auto loan refinancing is similar to refinancing a home loan. In a nutshell, automobile owners apply for a new auto loan to replace the existing. The new lender will payoff the old loan, and you begin making monthly payments to them. The concept and process is very simple. Yet, few people take advantage of auto loan refinancing.

Some auto loan buyers are unaware of auto loan refinancing. However, if bad credit resulted in a high interest rate, it may be possible to lower that rate without extending the loan term. The money you save can be used to payoff credit cards or build a cash reserve.

Choosing a Refinance Car Loan Lender

Many auto loan lenders offer refinancing. However, if choosing to refinance for a lower rate, you are required to apply with a new lender. Existing auto lenders are unable to refinance the auto loan. Finding a new lender is simple. To begin, you may contact your credit union or bank and request information on auto loans. Some may even offer a no-obligation quote.

Next, complete an online quote request with an online auto loan broker. This is one of the easiest methods for locating a reputable auto loan lender. Besides, brokers will provide you with up to three different offers. If refinancing to get the lowest possible rate, multiple offers is a huge plus because they allow quick and easy loan comparisons.

Auto Loan Refinancing Requirements

Before applying for a new loan, vehicles must qualify for a refinancing. In order to refinance a car loan, you must owe more than $7500. Secondly, the name on the auto loan refinancing application must be the same as the name on the original auto loan. Most importantly, for an auto loan refi approval, the amount owed on the car cannot exceed the value.

Should you refinance with bad credit? Yes, but only if you can get a savings with a lower rate or need a more manageable monthly payment. Luckily, with so many lenders competing for your business, you can often find good rates and terms for bad credit auto refinance loans.

Has Your Credit Score Improved?

If your credit score has improved since you originally financed your auto loan, then you probably qualify for better rates. Fortunately, time is your chief ally when it comes to seeing your credit score improve. Two years after a negative event, like a bankruptcy or foreclosure, and it ceases to have a significant impact on your score.

Improvements in your income, investments, and cash reserves can also increase your score. Reductions in your overall debt levels will also boost your score.

Have You Compared Auto Loan Rates Recently?

The only way to see if you can get a better deal on your auto loan is to compare loan quotes. In a few minutes you can have multiple offers from broker sites. You can also research rates lender by lender.

Regardless of which strategy you choose, request quotes without giving access to your credit report. Otherwise, you will see a dip in your score due to multiple credit inquires. When requesting loan estimates, makes sure you specify that you want a refi loan.

Will You See A Savings Or Benefit?

Even with a really good loan offer, you need to make sure you will see a savings from refinancing. Take your best loan offer and calculate the cost of both interest and fees. Compare that to the remaining interest due on your auto loan.

If you have a short amount of time left, you may find that even with lower rates, you won’t see a savings. However, there are times when you may still choose to refinance. For instance, you can lower your monthly payment by extending your loan term. You may also choose to refinance after a divorce in order to keep the car in your name.

Refinancing a car loan is a decision that should be based on good information. Check loan offers and compare it to your current loan. Then you can decide what is your best option.

Plan to refinance your auto loan but have bad credit? You can still find financing at reasonable rates by searching online for your lenders. Researching rates and terms will lead you to a good deal, saving you money each month. Increase your odds of getting approved for the best loans by following these tips.

Think About A Co-Signer

The better your credit score, the better your rates. So if you don’t have great credit, look for someone who does. By having them co-sign for your loan, you can find yourself qualifying for much better rates. Lenders look at your co-signers record, but you pay for the loan.

If you are a couple, you may also choose to use the person with the best credit score to apply for the refinance auto loan. You can find out who has the better record by requesting your credit score online.

Update Your Credit Report

While you can’t change your credit report overnight, you can be sure it is in the best condition possible. Take a few minutes to review your free copy and make sure all information has been updated. You may also want to include an open letter explaining any reasons for your bad credit score. Mitigating factors, such as a job loss or illness, are sometimes considered by lenders.

Eliminate Old Debt, Hold Onto Cash Assets

Besides your payment history, lenders also look at your debt and cash assets when considering your loan application. The less debt you have, the better you look to lenders &ndash especially if you have a high income.

Cash assets are also important. Lenders like to see at least six months of cash reserves in the bank. This can mean a savings account, money market, or CD.

Be Honest With Your Information

More than likely, you will be approved for refinancing. What rates you qualify for depends on your information. So to get the most accurate loan estimate, be honest about your credit background. That way, when you actually apply for the loan, you will be approved for the rate quoted.

Remember too that not all lenders charge the same rate. A careful search will bring up favorable rates, even for those with poor credit. Sub-prime lenders often provide loans on a point or two