Just like your home, your car loan can be refinanced.
The requirements for refinancing a vehicle are similar to a home. You generally cannot refinance a vehicle if you owe more than what the current book value is of it. Also, vehicles are considered depreciable assets – the value goes down over time. If your vehicle is financed and has over 100,000 miles, it’s going to be more difficult to find favorable terms to make it worthwhile. At that point, your vehicle is nearing it’s expected usable lifespan.
What to Consider
If you are considering refinancing your vehicle, it’s likely because you want a lower monthly payment, or lower interest rate. Before you get too far into the process, consider these things:
- Is there a pre-payment penalty? Most car loans do not have any pre-payment penalties, but read through your contract to verify this.
- What is your credit score now compared to when you originally financed? Are you using something like Credit Karma to keep track of your credit score? Has it gone up? To get the best loan terms possible, you generally need a credit score above 700.
- What is your current loan payoff amount? Find your most recent loan statement and see what your payoff amount is.
- What is the current value of your vehicle? Use one of the reputable used car valuation guides available to you in order to get a good sense of what your vehicle is worth. Some examples are the NADA Guide, or KBB Instant Cash Offer.
- What banks are you considering for refinancing? Sometimes you are able to refinance with the bank that is currently servicing your loan, and they may be able to offer you a good rate based on your payment history with them. Regardless, it is good to shop around to find the best combination of rate, and any fees/closing costs that may come along with the process.
- Do you have all of your documentation ready? Usually, you are going to have to provide a lot of documentation for closing on your refinancing. Similar to refinancing a home, you will need proof of income, photo ID, proof of insurance, information for your current loan, etc. Be sure to ask what is required while you are shopping banks for the best interest rate and fees.
Who Refinances Auto Loans?
You will save time and money by using MyAutoLoan.com. They match you with multiple lenders based on your needs, and have a very high approval rate. The process is quick and easy, and you will have multiple offers in your inbox as quickly as a few minutes after submitting your application. Applying with MyAutoLoan.com doesn’t affect your credit score, and you can get your vehicle refinanced as fast as you’d like.
Not to be outdone, MotoRefi claims that they average a savings of $100/mo. for their clients. Between interest rate reductions, and term adjustments, people are able to significantly reduce their car payments each month. The whole refinancing process can be completed online, and in the comfort of your home. If you’re not sure if you want to refinance, they have a pre-qualification process where you can provide some basic information, which does not include your social security number, so you can see what kind of difference refinancing will make in your monthly payments.
LendingTree is popular for home refinancing, but they also have services dedicated to finding banks that will compete to refinance your vehicle. Because of the competition that LendingTree brings to the table, you’ll win with a lower rate. All of the competing banks’ offers are laid out for you clearly, so you can easily compare terms and rates from one lender to another, and choose which one(s) you continue to talk to. This makes the process of finding a bank to refinance much quicker, and you will easily have at least 2-3 quality lenders seeking you out to earn your business, rather than spending endless hours hunting down different banks, and finding an answer to the question, “do you refinance auto loans?”
This option offers simplicity. LendingClub’s model connects borrowers with a pool of investors to help fund loans. This results in lower costs that get passed onto borrowers. There are no origination fees, no pre-payment penalties, and their rates tend to be competitively low. Many testimonials speak to the ability to save up to $80/mo. You will also get a quick answer on qualification, along with available rates.