While it’s true that refinancing is a great way to save money on your car loan, it’s also important to be sure that you understand the process before you do anything. When you’re looking at refinancing your car loan, there are several questions that you should ask to make sure everything goes smoothly and without any issues down the road:
How much are you currently paying on your auto loan?
To get started, you’ll first want to figure out how much you are currently paying on your auto loan. This will help us determine what kind of monthly payment we can offer you and how much interest rate reduction we can achieve for you.
What is your current interest rate?
You should ask this question to determine your car loan’s interest rate. You can also ask about any other fees included in your monthly payment, such as a late or origination fee.
Ask them for documentation showing all these things, so you know exactly what it will cost you when refinancing.
Do you have enough equity in your vehicle to refinance?
When you refinance, you get a new loan that replaces your old one. You can only refinance if you have enough equity in your car. Equity is the difference between what you still owe on your loan and how much the vehicle is worth now.
Use an auto loan refinance calculator to determine whether or not you have sufficient equity to get approved for refinancing. If the calculator says no, don’t panic; here are some options for getting around this problem:
How long do you expect to keep your car?
If you’re planning to keep your car for a long time, it might be worth refinancing. If you plan on trading in your car for a new one every few years and/or financing another vehicle simultaneously, there’s no reason to refinance your old loan.
In order to figure out how long you’ll keep this particular vehicle, ask yourself: “How many miles do I expect my current vehicle to have before I trade it in?” Consider factors like the number of miles per gallon your car gets and how far away from home or work you typically drive.
What are the details of the refinanced loan?
This is the time to ask a lot of questions. What are the details of the refinanced loan? What is the new interest rate? How long will it last if you make all payments on time, and how much interest will you pay over that time period? How much have fees been reduced?
In addition to these questions, make sure you find out whether there are any advantages to refinancing now instead of waiting a few years. According to Lantern by SoFi’s experts, “Your refinance auto loan term can be for the same remaining term or changed.” If so, ensure those advantages aren’t outweighed by any disadvantages (such as an increase in monthly payment).
In summary, refinancing your car loan is a smart move that can save you a lot of money. But before you jump into the process, it’s important to know the ins and outs of the process while also making sure your credit score is at its best.