Car shopping is so stressful that you may end up bringing home the car of your dreams but with a nightmarish auto loan. If this describes your situation, you might find yourself asking, “How can I refinance my car loan?” Similar to home refinancing, an auto refinance loan will pay off the old loan and restructure the terms to apply a more favorable rate, extend the payment period or lower monthly payments.
Before anything else, it is important to research prevailing interest rates for auto loans. Since you already have the car, you can focus completely on loan-related issues such as affordability of your current loan and saving on interest payments. You can get quotes from a few lenders to see who has the most favorable offer. Make sure that your comparison of monthly payment is based on comparable terms. Auto loan terms can run from 12, 24, 36 or 72 months; monthly payments will be lower for longer-term loans.
If you have been mulling over the question “how to refinance my car loan,” make sure that your original loan does not include a prepayment penalty because this might make refinancing too costly. Also, lenders are more likely to approve refinancing when your car is newer because of the higher market value. When you find a new lender, they will contact your original loan provider, request the payoff amount and arrange to make the payoff from the proceeds of your new loan.
Resolving your refinance my car loan issues is usually a pain-free process that should take no more than a week if your documentation is in order. If your credit score improved from the time you bought the car to the refinancing date, you may be saving a hefty amount off interest payments alone.
If the auto refinance does not work out, consider other ways to raise funds, including a home equity loan or a tax refund loan. If you have assets such as structured settlements or annuity payments, selling them may help pay off a costly car loan.