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How to shop for Auto Loan Refinancings
When making your monthly car payment, have you ever wondered, “Can I lower the interest rate on my car loan?” If you haven’t, you should. An auto refinance could save you money.
It isn’t always easy finding the lowest auto refinance rates, so we’ve put together the ultimate guide to make it a little easier.
In this guide, we break down everything you need to know to save as much as possible when refinancing your auto loan.
How to compare auto loan refinance lenders?
To find the best auto refinance companies, here are four key factors you should consider:
1) Refinance auto loan rates
Look at the interest rate range offered by lenders and get quotes to find out what each lender can offer you. This will determine how much it will cost you over the term of the loan, so this is one of the most important factors. Your credit history and financial profile will determine what you can get.
SuperMoney’s auto loan engine lets you compare interest rates from a variety of lenders almost without effort. Simply answer a few qualifying questions and, without affecting your credit score, we’ll provide several competing offers. After that, you can compare lenders side by side to find the right one for you.
2) Total auto loan cost
In addition to the interest rate, you will want to look at the big picture. Calculate the total cost of the interest over the length of the loan term along with any fees the lender charges. An online loan calculator can help with this step.
3) Eligibility requirements
Check the eligibility requirements to ensure the lender suits your needs. One may be a better fit than another. For example, one company may refinances loans up to $45,000, while another’s maximum limit may be $55,000. As well, some may be more lenient when it comes to refinancing a car with bad credit.
4) Customer reviews
Next, find out if current customers are happy with the service. Even if a lender can save you some money, it may not be worth the headaches you’ll suffer from a bad customer experience. Read reviews to find out how customers rate a lender overall and if there are any specific areas that people repeatedly complain about. Here are few things to look for:
- Accessible customer service representatives through multiple channels
- An easy online application process
- User-friendly online account management
- Tech-savvy support staff
- Quick resolution of issues
- Customer-focused problem solving
- Quick funding
- Streamlined title management
Shopping around is always a best practice when making a purchasing decision, especially a big one. With the help of SuperMoney’s auto loan offer engine and the criteria above, you can easily find the best deal on refinancing your car loan. Let the savings begin!
Why are auto refinance interest rates so important?
The interest rate you get determines how much you will pay to borrow the loan amount.
Lenders will provide you with your annual percentage rate (APR), the percentage of interest you will pay each year of your loan term. Note that there may be additional fees on top of the APR.
By finding the lowest auto refinance interest rate and fees, you can potentially lower your monthly payment amount and overall loan cost.
How to get the lowest auto refinance interest rates
How do you find the lender that will offer you the lowest rate? Here are some guidelines.
First, analyze your current loan. Figure out all the specifications, including your APR, monthly payment amount, total cost, and term, as well as the lender’s quality of service.
Once you have that information, it’s time to compare the competition.
Many lenders now allow you to apply online and only run a soft credit check. This means their check won’t affect your credit score. You can get a response in as little as one minute, enabling you to see the rates and terms for which you prequalify.
This information is empowering because you can conveniently find out what dozens of lenders will offer you from the comfort of your home.
After you get quotes and compare offers, you will be able to identify the lowest auto refinance rate. Then you can weigh such other factors as term length, fees, and customer service to find the best deal overall.
Average auto refinance interest rates
The average interest rate on a 60-month auto loan in the U.S. is about 4%. However, the interest rate you get will depend on several factors such as:
- Your vehicle type.
- The age of your vehicle.
- Your credit score.
- The lender you choose.
- The term length you select.
For example, according to MyFico's loan savings calculator, the interest rate on a 48-month used auto loan varies with a borrower's credit score as follows:
The lower your credit score, the higher your interest rate.
Further, any factor that increases the amount of risk for the lender (i.e., an older vehicle, longer term, etc.) will increase the amount you have to pay to borrow.
However, each company will evaluate risk a bit differently, which is why it is so important to apply with a variety of lenders.
Where to find lenders that refinance auto loans
Many types of financial institutions refinance auto loans. These include banks, credit unions, direct lenders, and marketplace lenders, just to name a few.
It will take hours of research to build a list of potential lenders and then compare them all. Or it would, if you had to do it all on your own.
Luckily, we’ve already done most of the work you right here. You’ll find a list of industry-leading lenders with a complete overview of each company and its services. You’ll be able to compare rates, terms, and real-user reviews all in one place. No need to do laborious site-by-site research yourself.
You can save more time by getting preapproved loan offers. Knowing what you qualify for can help guide your research in the right direction.
With our auto loan engine, you can get multiple personalized offers from vetted lenders without hurting your credit score. After you answer a few quick questions, you’ll find out within minutes which lenders, if any, you prequalify with. By doing so, you’ll save hours of time that you’d otherwise spend completing individual applications.
When should you refinance a car loan?
Is this the right time for you to refinance your car loan? Well, that depends.
First, most lenders will want to see that your current loan is at least 90 days old. If it is, the next step is to figure out how much you can gain by refinancing and how much refinancing will cost you.
Your added value can come from lowering your payments, a cheaper overall cost, and better customer service. On the other hand, added costs can include a longer loan term, fees, and poorer customer service.
If you can gain enough value to warrant the costs of refinancing, then you should do it.
Situations that often make an auto refinance loan more valuable include:
- Your credit score has increased.
- The market has changed, causing a drop in rates.
- You got a bad initial deal.
- Your current lender provides poor customer service.
- You need to lower your payments.
Auto loan refinancing requirements
If you’ve decided you can benefit from an auto refinance, you’ll want to make sure you meet the most common requirements to qualify for one. Let’s take a closer look at several of them.
Credit score
In addition to determining how good a loan offer you get, your credit score will help determine if you get offered a loan at all. Lenders often perform a soft credit pull (won’t affect your credit score) to preapprove you and offer you a deal. If you accept, they will perform the hard credit inquiry (may affect your score) to initiate the loan.
Right location
Not all lenders service the entire U.S. Check with those of interest to ensure they serve your state.
Sufficient Income
Lenders will check your income via pay stubs, bank statements, etc. Each will vary in its minimum requirements.
Citizenship
Borrowers must be U.S. citizens or permanent residents with valid government-issued identification documents.
Insurance
You will need to show proof of comprehensive and collision insurance.
Vehicle restrictions
Many lenders will have requirements that limit what kind of vehicles they will finance in order to protect their investment.
Current loan restrictions
Lenders typically also have minimum and maximum limits on their loans. Your existing loan will need to fall within the range.
There may also be rules on how long you must have had your current loan and how much time may be left on it. For example, LendingClub requires at least three months to have passed since you initiated the original loan. Be sure to check with lenders as you shop around because requirements will vary from one to the next.
FAQ on auto refinance
How long should I wait to refinance my car?
Wait at least 60–90 days after getting your original loan to refinance. It typically takes this long for the title on your vehicle to transfer properly, a process that will need to be completed before any lender will consider your application. Refinancing this early typically only works out for those with great credit.
Does refinancing hurt your credit?
When you refinance a loan, you are closing out an old loan account and replacing it with a new one. This can affect your credit scores because most scoring models take into account the age of the credit accounts on your credit reports. The longer your credit history, the better.
Can you negotiate refinance rates?
Refinancing often makes sense if you can redo the loan at a lower interest rate, but it costs money to refinance. Cutting loan processing fees and closing costs can save you money, but you’ll need good negotiating skills to make it happen.
Can I refinance my car through my bank?
The major benefit of getting refinancing from a bank is that, because of their large pools of capital, they may be able to refinance your existing loan for a lower interest rate. However, if you are focused on what’s easiest, a credit union might be your better bet.
When is it bad to refinance? Whenever the situations that make refinancing a good idea don’t apply to you, refinancing probably isn’t a good idea. If your credit score has decreased, interest rates have gone up, and you can’t get a better deal, you should probably stick with your current loan.
Ready to find your best auto refinance interest rates?
Now you know how to find the lowest auto refinancing rates.
- It starts by identifying the pros and cons of your current loan. Then shop around online to see if you can get a better deal.
- Remember to compare monthly costs, total costs, and service; it's not all about the lowest rate.
- If you can get a better overall deal than you currently have, then make the switch and start saving.
Are you ready to find out what rates you qualify for? It only takes a minute and it won't hurt your credit.
Consider using SuperMoney's auto loan engine. This tool makes it easy to get prequalified offers from several auto lenders all in one place.
As you use this tool and other methods to compare lenders, you'll have a better chance of finding the one that can help you save the most money.
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Get Competing Auto Refinance Offers
Compare real offers from multiple lenders.