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 smarter financial decisions by offering interactive financial calculators and tools as well as publishing reliable and original content, by enabling you to conduct your own research and compare information for free – so that you can make informed financial decisions. Bankrate has partnerships with issuers such as, but not limited to American Express, Bank of America, Capital One, Chase, Citi and Discover. How We Earn Money The deals that are advertised on this site come from companies that compensate us. This compensation may impact how and where products appear on this website, for example, for example, the sequence in which they appear in the listing categories, except where prohibited by law for our loan products, such as mortgages and home equity, and other home lending products. But this compensation does have no impact on the content we publish or the reviews that you see on this site. We do not contain the universe of companies or financial offers that may be open to you. Tom Werner/Getty Images
3 minutes read. Published February 24, 2023
Writer: Rebecca Betterton Written by Auto Loans Reporter Rebecca Betterton is the auto loans reporter for Bankrate. She specializes in assisting readers with the ins and outs of securely taking out loans to purchase an automobile. The article was edited by Rhys Subitch Edited by Auto loans editor Rhys has been writing and editing for Bankrate from late 2021. They are passionate about helping readers gain the confidence to manage their finances through providing precise, well-researched, and well-written information that breaks down otherwise complicated topics into bite-sized pieces. The Bankrate promises
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If you have questions about money. Bankrate has the answers. Our experts have been helping you manage your money for over four years. We are constantly striving to give our customers the right guidance and the tools necessary to succeed throughout life’s financial journey. Bankrate adheres to strict standards standard of conduct, which means that you can be sure that our information is trustworthy and accurate. Our award-winning editors and journalists provide honest and trustworthy content to help you make the best financial decisions. Our content produced by our editorial staff is truthful, impartial and is not influenced through our sponsors. We’re open about the ways we’re in a position to provide quality content, competitive rates and useful tools to you by explaining how we make money. Bankrate.com is an independent, advertising-supported publisher and comparison service. We are compensated in exchange for placement of sponsored products and, services, or by you clicking on specific links on our website. This compensation could impact how, where and in what order products appear in listing categories, except where prohibited by law for our mortgage or home equity products, as well as other home loan products. Other elements, such as our own website rules and whether or not a product is offered in your area or at your self-selected credit score range may also influence how and where products appear on this website. We strive to offer the most diverse selection of products, Bankrate does not include information about each credit or financial products or services. If you are having trouble making your current loan payments, swapping the current auto loan with a brand new one the best way to save money and continue to drive your car. However, there are some typical mistakes to avoid so that you don’t end up in yet another precarious financial spot. Top 7 car refinancing mistakes Avoid these common traps when refinancing your car loan. 1. Don’t check the refinancing requirements. Lenders hold specific when it comes to refinancing. Keep an eye out for requirements pertaining to the car’s mileage, age and the amount you have left on the loan. For instance, lenders usually will require a minimum of six months’ worth of payments to your loan and a balance of between $3,000 and $5,000 to refinance. Bankrate tip
There are specific refinancing guidelines on the lender’s websites or Bankrate’s .
2. Do not contact your current lender initially. Although your current lender might not offer the lowest interest rates, it is still the best place to begin. Before you look into refinancing options that aren’t offered by your current lender it is advisable to reach out and explain your situation and see if they could assist. Some lenders offer , which changes the terms, payment due date or the interest rate to help borrowers get financial relief. Tips from Bankrate
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 an existing lender might.
3. The extension of the loan term too long Refinancing aims to reduce costs, however when you extend your loan to a large extent it could cost you more money over the loan’s duration. While a will mean a lower monthly payment but you’ll also be paying more interest. Tips from Bankrate
Before adjusting your term Take advantage of auto refinances to confirm you will save money.
4. Don’t take into account your credit score Like most situations with finance, credit serves as the main determinant for approval. So, work to improve and prior to you refinance your loan. You’ll have a better chance to receive the available and walk away with an improved loan overall. If your credit score is 670 or higher typically qualifies borrowers for the most favorable interest rates. Tips from Bankrate
Check your credit ahead of loan applications by using AnnualCreditReport.com.
5. Only shopping with one lender Similar to when you are shopping for your first auto loan We recommend that you compare at least three lenders. So, while signing off on the first loan offer might sound appealing, not all loans are all created equally. Ultimately, the lower the interest rate, the less you’ll pay for your car payment. It is important to make sure you’re getting the best offer available. Bankrate tip
Compare the rates currently offered by a range of lenders. Pay attention to conditions for approval, the repayment options and how it stacks up against what you currently have on your loan.
6. Becoming upside down on your loan Before refinancing, make sure you know whether the equity on your car lies with a . Equity is the amount at which the value of your vehicle is greater than the amount you have to pay on the auto loan. If you owe more than your car is worth or have negative equity refinancing is not the best option. The bankrate advice
Don’t make a deal to refinance a vehicle that you’re not able to pay for. Examine the areas where you might be overextending and estimate the costs prior to signing the new loan.
7. Don’t give up after the first rejection loan refinancing requirements differ from lender to lender Therefore, even if you’ve been rejected by one lender doesn’t mean you’ll be rejected by all. If you’re thinking, “Why can’t I refinance my vehicle?” you have the right to inquire with your lender in accordance with the (ECOA). They have to explain why your application was not approved. Bankrate tip
Knowing why you were denied will improve your chances of being approved later on. For example, if the credit rating of yours is low, you can work towards improving it before you apply next time.
The bottom line is that refinancing your vehicle loan could be risky It is an excellent option to reduce your monthly cost and continue paying for your car. Be aware of these mistakes common to all in mind, and keep up to date on current to ensure you walk away with the most suitable loan to meet your needs.
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This article is written by Auto Loans Reporter Rebecca Betterton is the auto loans reporter for Bankrate. She has a specialization in helping readers with the ins and outs of securely taking out loans to purchase a car. Written by Rhys Subitch Edited by Auto loans editor Rhys has been editing and writing for Bankrate since the end of 2021. They are passionate about helping readers gain confidence to take control of their finances with concise, well-studied information that breaks down complex subjects into bite-sized pieces.
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