How Does Car Loan Refinancing Work?

Refinancing your car loan is basically like buying your vehicle again. You don’t have to negotiate the price of your car, as you are the owner. The balance on the car loan will be what you still owe.

The lender will assess your eligibility to finance your vehicle and qualify you for credit when you refinance an auto loan. After you have been approved, the lender will issue a new financing agreement for the amount due and pay off your existing car loan in full.

Refinance of your auto loan is just like the loan you already have. Each lender will have different criteria but the same requirements.

Can I Refinance My Auto Loan To Get Cashback?

Cashback is possible when you get the right deal. You should make sure you are getting a lower interest rate and/or better terms for your new car loan.

How Car Loan Refinancing Could Be Beneficial?

Refinance is possible regardless of whether you have a car that was purchased on non-prime terms.

1. Lower Interest Rates

If your credit score is higher, both prime and non-prime buyers of cars can enjoy more favorable interest rates. Even though it may seem small, a significant decrease in interest rates can result in thousands of dollars in savings over several years.

2. Loan Extension

Refinancing can allow you to increase the term of your loan by many years, which could help reduce your monthly debt. You can extend the loan term to spread the principal amount but pay more interest. It can provide a borrower with a monthly payment they are more comfortable with.

3. Add A Co-Signer To The List Or Remove A Signer

You may need to get rid of a cosigner if you have required one to be able to obtain your car loan. If the vehicle was purchased by an unqualified buyer, such as a parent financing a car to a teen, they may want to modify the terms of financing to reflect the correct person. You can refinance your auto loan.

Have You Recently Improved Your Credit Score?

Refinancing may be a good option if you have a high-interest non-prime car loan with a high-interest rate because of your bad credit rating. You may be eligible for a lower interest rate if you have improved your credit score since you took out the loan. Use a refinancing car calculator to calculate your savings and repayments when you switch your vehicle loan.

Are You Able To Show Good Credit Or Bad Credit?

Lower interest rates may be a catalyst for refinancing a vehicle loan to borrowers with super-prime credit or prime credit. A mere one to two percent interest savings can mean hundreds, or even thousands, of dollars in annual savings over the term.

Have Your Financial Circumstances Changed In Recent Years?

Your improved debt-to-service ratio may qualify you for better financing terms if you have increased your income or reduced your debt.

Documentation required to refinance your vehicle

Refinance your auto loan is easy if you are ready. The information you need will be the same as for your original car loan credit application. This includes:

  • Information about current pay stubs and tax returns.
  • Pre-authorized payment agreements can be made using banking information or void checks
  • Photo identification is required to prove you are the person you claim to be.
  • Information about your vehicle, including make, model, and trim information, as well as the title.