Auto Refinance Process
When interest rates drop, refinancing an auto loan may save you money each month. Before shopping for a loan, however, it helps to understand where you stand with credit. You should also research all possible auto refinance options. Securing the lowest interest rate and minimizing fees will assist in securing the lowest cost auto refinance. Understanding the process of refinancing is also helpful.
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Instructions
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Request a copy of your credit report. Most lenders use risk-based lending for auto loans. The lender will decide which rate to offer based on the quality of your credit. Order a credit report and score through Annual Credit Report (see Resources). A report is free once a year; however, a credit score will cost you a small fee.
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Shop auto loan rates. Comparison sites, such as Bankrate.com, allow you to compare auto loan rates from lenders across the country. Make a list of the financial institutions that offer the most attractive rates.
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Select an auto loan term. Auto loan terms typically range from 12 months to 84 months. A longer loan term will lower monthly payments; however, the overall cost of financing the vehicle is higher. Select the shortest auto loan term you can afford.
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Complete a loan application. Lenders usually offer a few different methods for filling out an auto loan refinance application, including online, over the phone or in person. Complete an application, which will require income information, credit history and monthly debt obligations.
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Provide the required documentation. The lender will require documentation to process and approve the loan. Typical documentation may include recent pay stubs and bank statements. Depending on your situation, the lender may require additional documentation.
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Sign loan documents. The lender will process your auto loan and provide approval. Once approval has been given, the lender will set up a date to sign auto loan documents. Review the auto loan documents to ensure the interest rate, loan term and fees are accurate. Most auto loans fund within a few days, but this varies by lender.
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Tips & Warnings
Check out auto loans with local credit unions. Credit unions are nonprofit and return profits to members, through reduced interest rates. These lenders may offer reduced auto loan fees as well.
Watch out for fees. With an auto loan refinance, possible fees may include application fees and prepayment penalties. Request that the lender waive or reduce these fees to secure the best deal.
References
Resources
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