Common car refinancing mistakes to avoid Advertiser Disclosure Advertiser Disclosure We are an independent, advertising-supported comparison service. Our goal is to help you make better financial decisions by offering interactive tools and financial calculators, publishing original and objective content. We also allow you to conduct your own research and evaluate information for no cost – so that you can make financial decisions with confidence. Bankrate has agreements with issuers, including but not limited to American Express, Bank of America, Capital One, Chase, Citi and Discover. How We Earn Profit The deals that are advertised on this site come from companies that compensate us. This compensation may impact how and when products are featured on this site, including, for example, the order in which they may be listed within the categories of listing and other categories, unless prohibited by law for our loan products, such as mortgages and home equity, or other home lending products. This compensation, however, does not influence the information we publish, or the reviews you read on this site. We do not include the vast array of companies or financial offers that may be open to you. Tom Werner/Getty Images
3 min read Published on February 24, 2023.
Authored by Rebecca Betterton Written by Auto Loans Reporter Rebecca Betterton is the auto loans reporter for Bankrate. She is a specialist in helping readers in navigating the ways and pitfalls of taking out loans to purchase a car. The article was edited by Rhys Subitch Edited by Auto loans editor Rhys has been writing and editing for Bankrate since late 2021. They are committed to helping readers gain the confidence to control their finances through providing concise, well-researched and informative information that breaks down otherwise complex topics into manageable bites. The Bankrate promises
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You can find specific refinancing requirements on lender’s websites or Bankrate’s .
2. Don’t contact your current lender initially. Although your current lender may not offer the lowest interest rates, it’s the best place to begin. Before exploring refinancing options outside your current lender It is recommended to reach out and explain your situation and see if they could help. Certain lenders provide this service , which alters the terms, payment due date or the interest rate to give borrowers financial relief. Bankrate tip
Even if you still follow the process of refinancing your loan, it is possible that they’ll offer an offer that is better than what a new lender might.
3. Extending your loan term too much Refinancing aims to cut costs, but should you extend your loan excessively and you are spending more money over its life. While a will mean a lower monthly payment however, you’ll also have to pay more interest. Tip from Bankrate
Before term adjustment Take advantage of auto refinances to ensure you save cash.
4. Don’t take into account your credit score In most cases of finance, credit score serves as the primary factor in approval. Therefore, you must improve your credit and before you refinance your loan. You’ll have a better chance to receive the available and leave with an improved loan overall. Credit scores of 670 and greater generally qualifies borrowers to the most favorable interest rates. Tip from Bankrate
Check your credit ahead of loan applications by using AnnualCreditReport.com.
5. Shopping with just one lender Just as you would when shopping for your initial auto loan We suggest comparing at least three different lenders. While deciding on the initial loan offer might sound appealing, not all loans are made equal. Ultimately, the lower your interest rate, the lower your car payment. It is important to make sure you’re getting the best offer available. Bankrate tip
Compare current rates provided by a variety of lenders. Pay close attention to the eligibility requirements, repayment options, and how it stacks up against the current loan.
6. Being upside down on your loan Before refinancing, check where the equity of your vehicle lies with an . Equity is the amount by which the vehicle’s value exceeds the amount you owe for the loan. If you have debt that is greater than your car is worth or have negative equity refinancing your loan is probably not the best option. Tips from Bankrate
Don’t make a deal to refinance a vehicle that you can’t afford. Examine the areas where you might be overextending and calculate expected costs prior to signing an additional loan.
7. Giving up after your first rejection Auto loan refinancing guidelines differ from lender to lender So just because you were denied by one lender doesn’t mean you’ll be rejected by all. If you’re asking, “Why can’t I refinance my car?” you have the right to question for the lender in accordance with the (ECOA). They must explain to you the reason your application was denied. Bankrate tip
Understanding why you were denied will help increase your odds of approval in the future. If, for instance, the credit rating of yours is low You can work towards improving it before applying again.
The bottom line is that refinancing your car loan is not without risk but it’s a great option to reduce the cost of your monthly payments and keep paying for your car. Make sure to keep these mistakes in mind and be up-to-date with current information so that you can walk away with the right loan for your needs.
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The article was written by Auto Loans Reporter Rebecca Betterton is the auto loans reporter for Bankrate. She specializes in assisting readers in navigating the details of taking out loans to purchase a car. Edited by Rhys Subitch Edited by Auto loans editor Rhys has been editing and writing for Bankrate since late 2021. They are committed to helping readers gain confidence to control their finances by providing concise, well-studied information that breaks down complex subjects into bite-sized pieces.
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