If you didn't get the deal you were looking for, there's technically no time limit that you have to wait to seek refinancing on your car. However, you're not likely to find a lender willing to take a stab at drawing up a contract as soon as you've driven off the lot.
Refinancing Timeline Guidance
Refinancing is typically done to save money on your monthly auto loan payment. As a general rule, especially if you're dealing with a low credit situation, it's a good idea to wait at least a year for a chance to qualify for refinancing. However, if you didn't get the interest rate or monthly payment you wanted, but your credit's in decent shape, you might be able to qualify for refinancing after only six months.
Of course, how soon you can refinance depends on not only your credit situation but the lender you're working with as well. If nothing is standing in your way, some refinancing lenders may be able to draw up a new contract for you after only a few days. But it's recommended to wait at least 60 to 90 days, this way there's a chance for your paperwork to clear and for the vehicle title to be printed with your name on it.
Refinancing to Save Money
When you refinance your car you're closing out your original auto loan and signing a new contract, often with a new lender. The main reason people refinance is to lower the monthly payment on their auto loan, and you can do this by either extending your loan term or qualifying for a lower interest rate.
The combination of a lower interest rate and longer loan term will ultimately give you the most savings each month, but if your goal is to save money overall, you need to qualify for a lower interest rate. If you extend your loan term without getting a lower interest rate, you will pay more overall than you would have without refinancing.
Qualifying to Refinance
Qualifying to refinance right away can be difficult because if a lower rate had been available to you, you'd likely have been offered it during your initial negotiations. To have a good chance at qualifying for refinancing and get a lower rate, it's a good idea to improve your credit score before applying.
In fact, an improved credit score is typically a standard qualification for refinancing a bad credit car loan. Most refinancing deals are reserved for borrowers with good credit, but if you initially took out a bad credit auto loan, having a better credit score when you apply for refinancing will go a long way.
Besides improved credit, other standard refinancing qualifications include having a car loan amount that fits the lender's parameters, having less than 100,000 miles on your vehicle, and being current on your auto loan.
Refinance or Trade-In?
Sometimes refinancing isn't the solution, other times you or your car may miss some of the qualifications of refinancing lenders, making the process a no-go. If you've been turned down for refinancing, but need to get into a more affordable auto loan, trading in your vehicle may be the solution.
When you trade in you can use any equity in your car as a down payment, or if you have negative equity, you may be able to roll it over into your next auto loan. If you go this route, you may want to act fast, as used vehicles are in high demand, so you may get a good deal on your trade.
If you're ready to get the process of finding a more affordable loan started, we want to help. At CarsDirect, we have over two decades of experience connecting borrowers with credit challenges to local dealerships that have the lending resources they need. Let us take the hassle out of the search by filling out our fast, free, no-obligation auto loan request form.
