Refinance Car Loan Tips and Tricks

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Meghan Carbary has been writing professionally for nearly 20 years. A published journalist in three states, Meghan honed her skills as a feature writer and sports editor. She has now expanded her skill-set into the automotive industry as a content writer for Auto Credit Express, where she contributes to several automotive and auto finance blogs.


, - January 23, 2020

Refinancing can be a good option for people that want to lower their monthly payment. In order to refinance a car loan, you, your current loan, and your vehicle all need to meet lender qualifications.

What's a Refinance Car Loan?

Refinancing is when you replace your current loan with a new one, typically with a lower interest rate (APR) or a longer loan term. These two options are the only way for a refinance auto loan to reduce your monthly payment.

If you qualify for a lower APR, you can lower the total cost of your car loan. However, if you only qualify for an extended loan term, your monthly payment decreases, but the overall cost of your loan increases. This is due to increased interest charges that result from the longer loan term.

Before Looking for Refinancing

If you think refinancing might be a good option for you, the first thing you need to do is check your credit score and credit reports. You have to ensure that you have a good credit score, or at least an improved one if you originally took out a bad credit auto loan. Good or improved credit is the first qualification of a refinance car loan.

To check your credit reports for free, you can visit www.annualcreditreport.com. You may need to pay a small fee to get your credit score from the credit bureaus at the same time. However, you should first check to see if your bank, credit union, or credit card provider provides free access to your credit score.

If you passed the first hurdle, you should use a refinancing calculator to estimate if going through the process is worth it. You can also use an auto loan calculator to estimate the type of loan you might qualify for and compare those terms to your current loan.

Meeting Refinance Requirements

Even if you qualify for refinancing, you still need to make sure that your loan and vehicle meet the necessary requirements. Each lender has their own rules, so it's a good idea to shop around. Try to find a lender whose guidelines are most suited to your situation, and who can offer you the best deal for saving money on your monthly payment.

In addition to having a good or improved credit score, here are the general guidelines that are typically needed for refinancing a car loan:

  • Loan amount – Your loan amount must fall within the new lender's qualifying range.
  • Vehicle age and mileage – Your vehicle has to be within the lender's age and mileage range.
  • Equity – There must be equity in your car.
  • Current on your payment – You must be current on your present auto loan.

Refinancing guidelines vary, so when you're shopping for the best deal, make sure you get all the details and requirements up front to ensure you qualify.

Tips to Help You with the Refinancing Process

Like any car loan, a refinance auto loan depends on your situation. Here are a few tips to help the process go smoothly:

  • A credit score of at least 600 helps when you're considering refinancing.
  • Showing financial responsibility also helps, such as having past car loans showing paid on your credit reports, and/or a mortgage in good standing.
  • Make sure you have all the information ready to go when you sit down with a lender. This means knowing your current loan balance, APR, and term, as well as your vehicle information including the age, mileage, and VIN.
  • Waiting as long as possible after your original loan was signed can help as it gives you more time to improve your credit score.
  • Check with your lender first. Even though refinancing is typically done with a new lender, your current lender may be able to help.
  • You don't have to struggle to find refinancing on your own – we can help!

Trust CarsDirect to Help Find Refinancing for You

CarsDirect's trusted refinancing partner can help you view and compare offers online. All you have to do to get started is complete the request form on this page.

If, on the other hand, you need a car loan but have bad credit, we can connect you with the proper resources. We work with a large network of special finance dealerships that help people struggling with credit issues. Fill out our quick auto loan request form, and we can match you with a local dealer.

Whichever option works best for you, let CarsDirect be your guide!

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Meghan Carbary has been writing professionally for nearly 20 years. A published journalist in three states, Meghan honed her skills as a feature writer and sports editor. She has now expanded her skill-set into the automotive industry as a content writer for Auto Credit Express, where she contributes to several automotive and auto finance blogs.


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