You have probably heard of people refinancing a home loan, but what about used car detailers loans? In fact, refinancing used car loans is done every day to the benefit of the owner.
After all, next to rent or mortgage payments, auto loan payments usually represent the largest portion of a person’s monthly expenses. The opportunity to refinance an existing car loan would mean being able to lower monthly payments, as well as offering other possible benefits.
If you are saying, “Why refinance my used car loan?,” check out these answers to 5 frequently-asked-questions about used car loans:
1. What is an auto loan refinance?
A: Refinancing your auto loan simply means the act of paying off your current auto loan with a newer one. You can usually get an auto loan refinance through your current lender or through a completely different lender.
2. What do I need in order to qualify for this type of loan?
A: To qualify, it works much the same way as a regular car loan. For example, you will want to be able to prove your current income level and the fact that you are employed. Also, you should know that your new lender will run your credit report in order to obtain your FICO score.
3. How do I know if it makes sense to apply for a refinance?
A: It is never too soon after signing your existing loan to apply for a refinance. However, the general rule of thumb is that you want to be able to qualify for a lower interest rate than what you currently have. Indications that you may qualify for a better rate now include when:
* average auto loan interest rates are down (as compared to, say, the past 1-2 years)
* your credit score is stronger than it was before
* both of the above
4. Is there ever a time when I should avoid taking out this type of loan?
A: There are a number of factors to consider when deciding whether you should refinance your used car loan at this time. Factors include:
* whether you can get a lower interest rate than you have now
* how much equity you have in your car (equity = total value minus total owed on existing loan)
* how much more time remains on your loan before payoff
* total closing costs (e.g., loan origination fees, etc.) you will have to pay to refinance
5. How can I increase my chances of getting the best rate?
A: Why apply if you cannot qualify for the lowest-possible rate given your current credit score? It makes sense, therefore, to apply to multiple lenders. Go ahead and apply to your current auto lender for a loan refinance. But, then, be sure to also apply to at least 3-4 other lenders. And, ask for the same loan terms, such as repayment period, from each one so that you can compare rates properly.
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This entry was posted on Wednesday, September 29th, 2010 at 1:39 am and is filed under Auto Loan. You can follow any responses to this entry through the RSS 2.0 feed. You can leave a response, or trackback from your own site.