What does it mean when you refinance a vehicle?
Refinancing means you're paying off your current loan with a new one. If your credit score has improved, interest rates have dropped, you want to pay it off faster, or you need a more affordable monthly payment, refinancing could be a great way to save some serious dough.
BEFORE YOU START
Before you begin the application process, you'll want to go through the following steps to help you determine whether a refi fits into your financial goals.
- Review your current loan and rate.
- Check your credit score and see if it's higher than when you secured your original loan. If it is, you're more likely to receive lower rates.
- Compare interest rates and find the best deal for your financial situation.
- Use an auto loan refinance calculator to help determine how much you'd save on monthly payments, new terms, or both.
- Gather all of the documents a lender is going to need for proof of income, proof of insurance, and existing loan details. You'll also need to have your vehicle's make, model, year, vehicle identification number (VIN), and mileage.
THE APPLICATION PROCESS
If you followed the steps above, the refinancing process is easy!
After you've determined that refinancing your loan is a good fit for your goals, you'll want to complete the refinancing application.
Next, lenders are going to run a credit check and use the information you provided to see how much you owe and how much your car is worth.
Once approved, the funds can be sent to pay off your existing loan, and the title would be transferred to the new lender.
CHOOSE CAREFULLY
For all the potential positives of a vehicle refinancing, there could be some drawbacks. If the new loan pushes your payoff date further into the future, you could end up paying more money overall in interest.
Some additional things to look out for include:
- Closing costs and other fees
- Prepayment fees and penalties
- Temporary credit score dip
THE TAKEAWAY
Whether your goal is to get out of debt quicker or pay less in interest, a vehicle loan refinance can be a smart move in the right situations.
Find out if you can save by refinancing your vehicle with Azura!
