How Do You Know When To Refinance Your Car?
Refinancing an auto loan means replacing your current loan with a new one. There are many different reasons you might consider refinancing your loan. For example, if you’re struggling to make your current monthly payment, refinancing your loan could help break those payments into more manageable amounts.
If there have been changes to your credit score or interest rates have changed since you took out your loan, you may want to consider refinancing to get a different term, or a better interest rate. Arkansas Federal Credit Union offers fast and easy auto loan refinancing with competitive rates, various loan terms, and no application fee. Our online application is easy; you can apply online in under 20 minutes.
How Do You Know When to Refinance Your Car
There are a few reasons you might consider refinancing your car loan. Each of these reasons can change how your refinancing could benefit you financially.
1. Interest Rates Have Dropped
If interest rates have dropped since you took out your original loan and the loan is with another financial institution, you may be eligible for a refinanced loan with lower interest rates.
2. Your Credit Score Has Improved
If your credit score has improved since you initially took out your loan, you may be eligible for an improved loan in a few different ways. Your refinanced loan could provide lower monthly payments, interest rates, or a more favorable term, depending on where your car loan is refinanced.
3. You’re Struggling To Make Monthly Payments
If you are currently struggling to make your monthly payments for your auto loan, you may be able to refinance your loan to reduce monthly costs into more manageable amounts.
How to Refinance Your Car
Before you start applying for refinanced loans, you should take a few steps to ensure you’re knowledgeable about your loan and know what to expect when refinancing.
The first step is to review your current auto loan. Reviewing your existing loan ensures that you know the current loan terms and how much you’re paying. If your current loan mentions a prepayment penalty, keeping that in mind as you look into getting a new loan is essential. A prepayment penalty is a fee for paying off your loan early. Refinancing your loan may incur this penalty, so you should be aware of the amount of that penalty and how it will impact you financially.
After you’ve reviewed your current loan, you should check your credit score and estimate the value of your loan. A higher credit score could help you get a better term or rate on your new loan.
The value of your current loan is also significant in calculating your refinanced loan. To estimate the value of your existing loan, you should compare your loan amount to your car’s estimated value. It’s also essential to research refinancing rates. You should research current loan rates to know what kind of rates may be available for you.
The final step is to calculate how much you can save. You should be able to create some sort of estimate on how much a different interest rate or a shorter loan term will be able to save you through the life of the loan. When calculating your savings, this is where the prepayment penalty becomes important. If your current loan has a prepayment penalty, you should figure out that amount and subtract it from your potential savings.
Once you’ve researched refinancing your car loan, you can start working on using that knowledge to take actionable steps toward refinancing. You will need to provide a few different documents for your lender to refinance your car loan. To prove ownership of your vehicle, you will need proof of car insurance and your vehicle identification number. You will also need to provide evidence of your income and details about your existing loan so your refinanced loan rates can be accurately calculated.
How Do You Qualify to Refinance Your Car
To refinance your auto loan, you must meet specific requirements with your lender. Qualifying for a refinanced car loan will be different depending on your lender, but typically it’s based on a few various factors, which include:
- Your current loan term
- Credit score and history
- Payment history
- The value of your car
If you are interested in refinancing your auto loan, you should know how these factors can impact your loan. Contact us to learn more about the auto loan refinancing options available.
How Long Does It Take To Refinance Your Car?
The amount of time it takes for an auto loan to be refinanced depends on the lender and can vary. With some lenders, your refinanced loan could be approved the same day, but it can take up to two weeks for a refinanced loan to be approved. Refinancing a car loan is generally a relatively quick process, especially if you are prepared with the proper documentation to give to your lender.
How to Start Refinancing Your Car
If you’re considering refinancing your car, you should start by researching the best options for you and your particular situation. There are many different reasons you may be eligible for an improved loan. You should also explore your refinancing options, as other financial institutions may offer different auto loan refinancing options.
Arkansas Federal offers auto refinancing with no application fee and competitive interest rates. Refinancing with Arkansas Federal can lower your monthly payments, taking the burden of paying hefty monthly fees off your shoulders. You can apply online in a quick and easy 20 minutes or stop by one of our branches today. Plus, once approved, you could enjoy a break from payments for up to 90 days!*