If you’re currently paying a high interest rate, car loan refinancing: is now the time is a question you should ask yourself. Don’t think it’s worth the trouble or don’t know how to go about it? You may be surprise how much you can save and it’s easier than you think. Car loan refinancing – is now the time? Here are some tips.
What Car Loan Refinancing Is
Many people are familiar with refinancing a home. The concept for refinancing a car is similar. Unlike a home refinance, however, there’s no appraisal required for a car loan refinance. How it works: You pay off your car loan with your current lender with a refinance car loan from a different lender and a lower annual percentage rate (APR). With a lower interest rate, your monthly payments are less and you can use the savings to pay off other debts (like high-interest rate credit cards), put it in the bank, or use it to pay down the principle of your new car loan.
Keep in mind that most lenders won’t refinance their own car loans. You will need to shop for another lender. Don’t worry, there are others out there.
If You Can Save 1% – It’s Worth It
Who should shop for a car loan refinance? Anyone who didn’t get a 0% to 3% APR car loan from an automaker can benefit by refinancing with another lender. Let’s say that you did get a pretty decent APR on your car. It’s still to your benefit to start shopping the rates elsewhere. The rule of thumb when shopping for car loan refinancing is that it’s worth the trouble of going through the process if you can save 1% on your new loan.
Of course, the APR you receive will depend on your credit rating, so be sure to get a copy of your credit score along with your current credit report. You can get one free credit report from each of the nationwide credit reporting agencies annually through AnnualCreditReport.com, but you will need to pay extra for your actual credit score. The few dollars is a good investment. Why? Any lender will check your credit score before they’ll consider refinancing your car. The lowest interest rates go to – you guessed it – those with the highest credit scores.
Check Car Loan Refinance Rates
Experts recommend you start rate shopping early in your car loan. The sooner you can obtain a lower APR, the more money you’ll save over the life of your loan. Check out rates for car refinancing free at Bankrate.com.
One online lender to check out is up2drive.com (a division of BMW Bank of North America) – a partner of iSeeCars. You can apply online, an expedited check is cut for approved customers to pay off their current car loan, and car loan refinancing rates are advertised as the lowest.
If your current car loan APR is 1% or more than the rates quoted (for free) on up2drive.com, be prepared to fill out the online application. Have your vehicle’s 17-digit vehicle identification number (VIN) and enter your name exactly as it appears on your current car loan. Note that up2drive.com has no fees, no points, no origination fees and no early termination penalties. But do check with your current lender to see if there are any early payoff fees or penalties. Even if there are, it may be a small price to pay for the extra savings by refinancing your car loan with a new lender.
Car loan refinancing – is now the time? If you can save money on what you’re currently paying each month for your car loan, the answer should be obvious. It always pays to check it out.
For more tips on auto financing, visit our section on Car Loans where you can get additional tips and loan quotes from multiple lenders.
To figure out your car payments, use our auto loan calculator.