Refinancing a car loan is a great way to save money, especially if you have excellent credit and are able to lower the interest rate on your debt. If you can consolidate debt from various lenders at a lower interest rate, it will reduce how much the monthly payments cost and allow you to pay off the principal balance faster. Even though refinancing requires paying additional fees, those costs might be offset by the savings from reducing the amount of interest that accrues over time. Here's how to refinance a car loan:
Ensure that You Can Afford Your New Monthly Payments
When considering taking out a new loan, make sure that you'll be able to afford the new payments. Factor in all your current debts and your expected monthly expenses besides your new car payment. If you can't afford the payments, refinancing is not a good idea. Make sure that your new interest rate and loan terms will allow enough wiggle room in case of emergencies or unexpected expenses.
If You Can Afford Your New Monthly Payments, Gather Your Paperwork
Make copies of all paperwork related to your old car loan and bring them with you when you go to apply for a new car loan. Documents such as receipts and contracts might be necessary for processing. Gathering up documents has the added benefit of making certain that none of these important pieces get lost and that you have everything readily available should it become needed later on.
Visit Your Lender
Call around to different lenders and ask them about the process of refinancing a car loan. How much money they'll need to see upfront, their current interest rates and how long it will take to complete the application and approval process might be factors in making your final decision. If you feel rushed or put off by a lender's customer service representative, this is a sign that you may not want to go with that particular firm.
Refinance Your Loan
Loan refinancing is straightforward once you've chosen a lender and have been approved for a new loan. The same amount of debt from your old loan will simply be transferred into a new agreement at a lower interest rate, which will translate into lower monthly payments going forward. Make sure that all fees are included before signing over the dotted line, and that you're aware of when your next payment is due.
When the Loan Terms Have Been Set, Sign the New Agreement
Once you have a final interest rate and other loan terms set for your new car loan, it's time to sign the paperwork. At this point, be sure that all forgiven fees from your old car loan have been included in the amount being transferred so that no surprises come up later on. Once everything has been signed, you'll officially have a brand-new car loan to take care of!
Here are some free resources that you can check out to help with your car refinancing: