How to Refinance a Truck or Car Loan
You will learn how to get a lower payment, lower rate, or even get someone removed off the loan (i.e. ex-girlfriend, son, daughter, etc)
You will also learn why some lenders may approve you, then take back the offer after talking to you.
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Things You'll Need
- Minimum loan amount $7000
- VIN number
- A computer
- Knowledge of your vehicle
Instructions
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Before you attempt to apply, since it will be considered a soft hit on your credit, you will need to know what the trade-in value on your vehicle is. You will want to check www.nada.com, or www.kbb.com to get an accurate trade-in value on your vehicle. If there is too much of a difference between what you owe, and what the trade in value is, there is almost no point on trying to refinance the loan, unless you are willing to come up with some money to pay down your balance.
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Once you have determined that value on your vehicle, pick the lender you would like to go to. If you would like lenders to compete for your business, try www.myautoloan.com, or www.lendingtree.com. After you have answered a few questions, it will bring you to a page to fill in your personal information to give to lenders to run your credit. Your credit score, mileage, and age of the vehicle, will determine the rate that you are offered. Please note: You are not guaranteed to get offered a lower rate than what you had. Just because a lender approves you, does not mean that you will get a better rate. It simply means that you will be made an offer, if the lender deems you credit-worthy. Don't be insulted if you get approved for less than you thought. With the economy in the shape that it is in, and a vehicle being a liability, rather than an asset, higher rates are the road a lot of auto loan lenders are taking.
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Make sure the phone numbers you put on the application correct, and okay to call. Lenders will decline an application if they think your information is false, or if they call, and they get hung up on, because someone at home mistakes them for a telemarketer. There is nothing more annoying to a credit analyst than to call a home number provided by a customer, only to find out the customer hates getting phone calls from "telemarketers". If you get a credit-analyst in a bad mood, or one with a lot of work to be done, you can say good-bye to your loan.
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Tips & Warnings
Always have an idea of what your credit looks before you do this. If your credit score is already low, you may want to give it some time before you start running it over and over through different lenders. It may drop it too low to get approved.
Know your vehicle! The lenders will "book" your vehicle. This means they will ask you questions like "do you have a V-6 or a V-8 engine? Do you have a navigation system? Anti-lock brakes? These are things that the VIN number does not provide all the time, so the lenders have to ask. If you are not sure, and you provide the wrong information, it can cause your vehicle to be valued over or under what it is worth, which can affect the interest rate, or even the loan decision.
Ask your sales person what the loan to value it on your loan. It will give you an idea of what the other banks will come up with, too.
Do not hurl insults at a sales person to get the rate lower, or because you do not want to put money down. It won't work. Most of the big lenders have very specific guidelines, and the rates are generated automatically once your credit score comes through. There are some things that a sales person can try and negotiate with a credit-manager, but if the credit manager says "No", most likely it is for good reason. The economy is too bad right now to just turn down a loan for something silly. The banks will do whatever they can to earn the customer's business. Some of the smaller lenders and credit unions may be able to negotiate rates, but they will only finance up to 80% of the value of your vehicle, so if you have any negative equity in your vehicle, you will have to come up with the difference. Very few people have positive equity in their vehicle, even if it is brand new.
Remember-anytime you refinance, the lender has to deal with the DMV. The lender will provide you with all the necessary paperwork, but there may be a small fee to make the changes. The fees are usually between $20 and $100 depending on your state. Arizona has a fee of $4.00, that goes to their DMV, where Illinois has a $65.00 fee that goes to the Secretary of State. Every state has their set fees.
Document fees are standard, and usually can not be waived.
DO NOT LET someone talk you into purchasing additional warranties or other things if you do not need them. You are doing this to save money not add more money to it.
DO purchase GAP coverage if you have more than $2000.00 of negative equity. If you get into a car accident, your insurance company will only pay what your car is worth, which is why the lenders are so careful. GAP coverage should guarantee to pay off the rest. make sure you read the policy for any red tape.
DO NOT PURCHASE GAP if your vehicle is at 100% loan-to-value, or below. What that means is that you owe exactly what your vehicle is worth, and GAP coverage would be completely useless. If you are in that position, that is great. Chances are if you need to get rid of the car, you can just try and sell it to get it paid off.
Don't make the mistake of thinking that a company should be able to just write off some of your balance because your car is not worth that much. The banks just give you the money to buy the car of your choice. The dealer is supposed to give you a good deal. Once its out of their hands, you are just paying back the money. So if a finance company needs you to pay down your balance, but in return, they are willing to give you a much better rate, you are better off doing your best to pay the down payment, because it money you will have to pay back anyway, except it will come directly off the top, and you will not have to pay anymore interest on it. Plus your payments will drop a good amount depending on the amount you are paying your balance down by.
