Car Refinance Options
You may want to refinance your car loan to lower your car payment or to save money on your interest rate. If rates have significantly dropped or your credit has gotten better, you can save money by refinancing your loan. If you find yourself in a difficult financial situation, refinancing to extend your term may also help to lower your monthly payment. Consider your options to determine whether refinancing is beneficial.
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Bank
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You can select the bank of your choice for refinancing. You can apply to several lenders before making a decision based on rate or affordability. Guidelines, offers and approval methods differ by bank--call ahead and explain your needs before applying. You may also want to check payment methods or perks for different lenders. Some lenders offer a rate discount for automatic payments. Many banks require you to have an open bank account to complete a loan, so check bank fees and rewards. Some banks offer spending and travel rewards, while some do not.
Term
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Decide on a fair term when you refinance your auto loan. If you can take advantage of a low interest rate, you may find that extending or even shortening your loan term is more affordable than your original loan had been. Your bank will consider loan-to-value ratios for term allowance. For example, if you have a 6-year old vehicle with more than 100,000 miles, you may find that your term options are limited. It is highly unlikely that you can refinance for a five-year term in this situation. A newer vehicle with fewer miles may fare better. Your lender will let you know your options. Also check to determine prepayment penalty fees if you plan to pay your loan off early.
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Rate
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Check current rates by visiting the Web page of lenders--either locally or nationally based. Credit unions offer very competitive rates. If your credit has improved since your original loan, a lower rate can save you money in interest. If you are experiencing financial difficulty, you may find out your credit score is affected because of non-payment issues. If this is the case, consider qualifying rate and term to figure out if refinancing is right for you. The longer your term, the more you will pay in interest charges.
Money Down
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You can choose to put money down toward your refinance loan. You can cut down on interest fees by doing so. Depending on your credit and loan-to-value ratios, you may find that you are required to put money down--you'll find this out once your loan is approved or you receive a counter-offer. Putting money down towards your new loan can also lower your payment. Generally, for every $1,000 put toward a loan, you save about $20 per month. Take advantage of online auto-loan calculators to determine your vehicle payment with or without a down payment.
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