All About Auto Loan Refinancing
If you’re financially responsible, a smart thing to do is audit your finances every year. A self-financial audit means looking at your expenses and seeing where you can save money. Car refinancing is one of the best ways that you can cut back on your monthly/annual expenses. Anyone who entered a car loan with poor or mediocre credit should look to see if they qualify for refinancing their loan. To learn more about whether you’ll be eligible to refinance your car loan, continue reading!
How to Refinance Your Car Loan
Refinancing your car loan can be actually quite simple if you’re eligible. The process is very similar to the process when you originally bought the vehicle. But instead of re-negotiating a price on the value of the car, the new lender buys out the remaining debt on the vehicle and then loans you the money under better financing conditions.
Before you decide to refinance your loan with a new lender, there are a few things you should do. The first thing you should do is discuss with the potential new lender the interest rate you’d be able to refinance under. If the interest rate is lower than your current interest rate, you should see about if there are any fees for refinancing. Essentially, you need to calculate whether refinancing will actually cost you more in the long run than just sticking with your current car loan.
Should I Refinance my Car Loan?
If your original car loan comes with a high-interest rate, it’s probably because at the time of your application, you had poor to mediocre credit. If this is the case, refinancing your car loan probably makes sense for you in order to lower your interest rate. The two questions you need to ask yourself are if your credit score has improved since the original loan signing and if your financial situation has changed since signing. If your credit score has improved since signing the original loan, you’ll likely be able to refinance your loan under much better terms. If you’ve recently begun earning more, your debt to service ratio can get you approved for much better financing terms.
3 Reasons Why Car Loan Refinancing Can Help You
1. Extend the Length of the Loan Term
Refinancing may allow you to extend the length of your loan to make your monthly payments smaller and more manageable. This may still result in paying more interest, but if the goal is to make your monthly payments smaller, this may be worth it.
2. Lower Interest Rate
Whether you had bad credit or good credit at the time of your original car loan term, if your credit score has since improved, you may be eligible to refinance at a lower interest rate. While a small decrease in interest rate may seem insignificant, it can actually save you thousands of dollars over the course of a few years.
3. Remove a Co-Signer or Add a Payee
If your original loan required you to find someone to co-sign on the loan, refinancing could mean taking their name off as a co-signer. On the other hand, if the loan was for an unqualified buyer, parents buying a vehicle for their teen, for example, you could change the terms so that the loan is now in the teen’s name.
The Documents Required to Refinance Your Car Loan
If after reading this blog you’ve decided to refinance car your loan, these are the documents you’re going to need:
- The same info from your initial car loan application
- Details on your current vehicle
- Current pay stub and tax return info
- Banking info or a void cheque
- Identification
Looking to Refinance Your Car Loan?
Are you looking to refinance your car loan and lower your payments? If you want to know if you qualify for refinancing, apply with Car Loans Canada today! Regardless of your credit, we have options for you!
