Auto Refinancing

Auto Refinancing

By: Elise Gray - Posted in:
Agent helping finance a new automobile

How to Refinance Your Car

The art of auto refinancing isn’t some complicated animal. Refinancing a vehicle can seem like a mystery to many. However, you’ll be glad to know that many lenders make it easy to refinance. When you’re considering auto refinancing, there are a few things to consider. You’ll want to ensure that you still have the pink slip, which shows all of the terms, including the rate, length of the loan, and TTL (tax, title, and license). So now you can stop asking yourself, “How does auto refinancing your car work?” We’re going to explain how to use this information to help you save money! You’ll learn when to refinance your car and how to do it. We will also cover the best place to refinance car loans.

Some Auto Refinancing Questions You Might Ask Yourself Today:

  • What is auto refinancing? Moving bowered money.
  • Wanting to know how to refinance your car? The answer is simple. All you need to do is research different lenders in your area, as well as your credit score. Check NADA and find out the value of your vehicle. Make sure you’re not upside down, as that can be a costly issue in the realm of auto refinancing.
  • How does refinancing your car work? You take the 10-day payoff amount of your auto loan and find a different lender to lend you the money. You pay off your current loan and settle into a new, better lending agreement. The process of auto refinancing should be simple, if it’s not, you’re doing it wrong.
  • When is the best time to buy, and what about when to refinance your car? Look for the end of the year sales, as you might find more lending opportunities. If your credit score was once poor and it’s now great, you should consider auto refinancing opportunities.
  • What’s the best place to refinance car loans? The best place to refinance car loans is anywhere, technically. When you’re looking into auto refinancing, you need to be checking out rates. Rates are sincerely your best friend in this situation. Make sure you’re cutting the rate down, otherwise there’s no point in switching your loans over. The point of auto refinancing is to pay less while still paying your loan off faster. Even if the payment seems higher because you made the term shorter, you’re still winning because you will own the car faster. The power of auto refinancing is real; you just need to understand how to wield it appropriately.

The Basis of Auto Refinancing

The art of auto refinancing isn’t some complicated animal. If you’re looking to refinance your car, look at your auto loan. This is going to sound sad, but the truth is, some vehicles need to be refinanced but can’t be. One of the key phrases to know when you’re refinancing is “upside down.” To be upside down means that you owe more on your vehicle than what it’s worth. When you’re looking into auto refinancing opportunities, you don’t want to be upside down on your loan.

The True Cost of Cars &  Auto Refinancing

It’s Expensive to be Poor

Unfortunately, it’s usually people who cannot afford to be upside down, who end up being upside down. When I was a loan officer years ago, I remember looking at the amortization schedules of certain auto loans and asking about the high rates. I’ll never forget what my boss said, “It’s expensive to be poor.”

Basically, if you can’t pay your bills, creditors charge you more for loans – which makes no sense. If you didn’t have the money to pay your bill in the first place, why would all of the sudden have extra money to pay a fee on top of that? This is why lending options like auto refinancing become necessary.

If you apply for a loan with bad credit, you’ll find a lender to give it to you, for a high rate. This seems like it’s fine but it isn’t. You’ll end up paying $12,000 for a car that’s only worth $8,000 – that’s what it means to be upside down. Having negative equity in a vehicle can make the process of auto refinancing stressful, but not impossible. Anyone can navigate the world of auto refinancing, it just takes a little practice.

What to do With Negative Equity

Two things can happen when one has negative equity, either you pay off the difference when you trade-in or refinance or you crash the vehicle and GAP pays the difference. Of course, no one would ever intentionally crash a vehicle, therefore we’re all stuck paying the difference. If you do total your vehicle and you don’t have GAP insurance or money, you’re out of luck and a vehicle.

How Does Refinancing a Car Work?
Let’s say that your credit is decent and you do have enough money to cover the negative equity (if any) on your vehicle. how does refinancing work? Start with the basic vehicle information. Do your homework and look up the NADA value of your vehicle.

It’s A Numbers Game

If an auto refinancing offer seems too good to be true, it might be. Take note that your car is actually worth a tad less than what you see, as companies that pay for the service get different numbers. Always round up. So take that figure and then take the 10-day payoff amount of your loan, as we explained in Refinance Like a Pro. Compare the payoff amount to the NADA value and get an idea of what someone will pay for your model. Now you know how much money you need to save to refinance (if any) and you can start applying for loans, without worries of getting low-ball offers.

When to Refinance Your Car

Auto Refinancing Image

Now that you know what your car is worth, what you owe on it, and you’ve inspected the condition of the model, you can refinance! If you’re noticing that your credit has improved immensely, you have money saved to pay for any negative equity, and you’ve established a budget, it might be time to refinance your vehicle.

What’s The Best Place to Refinance Car Loans?

Finding time to research and speak with multiple companies before committing is one of the most difficult things about personal finance. There are tons of options. If you’re looking for different auto refinancing options, your best bet is with a credit union. Banks operate with shareholders in mind. Credit unions don’t have high fees because all of their profits get rotated back into their customer base. This is why banks have savings accounts whereas credit unions have shares accounts. You’re more likely to get a desirable rate from a credit union. Generally, all you have to do to qualify for membership is live, work, or worship near one. Do some research on your local credit unions and see if you qualify!

Auto Refinancing Rates

Some auto loan rates are ludicrous – there’s no other way to say it. People don’t fall for predatory rates that go higher than 6%. If you’re offered anything higher, then you should either wait for a better auto refinancing offer or keep building your credit by refinancing credit card debt and other debt crushing tactics. The best thing you can do is shop around. You don’t have to apply for 10 auto loans and ruin your score.

Find the Right Institution for Auto Refinancing

Look at different financial institutions and see what their rates are for auto refinancing. You can usually call and they’ll provide you with the answer. Some might say that they’ll only tell you if you apply for auto refinancing, but that’s not necessarily true. If their starting rate is around 4% for instance, they’re probably not that great. While 4% sounds enticing when you’ve been paying 10%, they’re saying that if you apply for a loan with them and you have A+ credit, the best you can get is 4%. People with perfect credit usually get anywhere from 1-2% (depending on the economy), so you have to be careful and be aware when looking for auto refinancing opportunities. Auto refinancing can work for anyone, just be sure you have done your homework.

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