Top 7 Refinancing a Car Loan Questions
If you’re looking at refinancing your auto loan, you’ll likely have questions. It is always best to do your research first. We get many questions about auto refinancing at Money FCU. Hopefully, this article will answer some of your auto loan refinancing questions.
Here are the top 7 refinance car loan questions we receive.
1. Are there fees to refinance my car loan?
Auto refinancing fees include a lien filing fee. This fee is generally relatively low and easily absorbed by the savings you’ll gain by refinancing. Money FCU’s lien filing fee is $5.00 for borrowers in New York State.
Some lenders have an additional lender fee, which is minimal (approximately $10 – $20). Money FCU does not have any extra fees.
2. When is auto loan refinancing a bad idea?
Auto refinancing is a bad idea when refinancing would place you at a higher interest rate and cost you more money than your current loan.
Another bad time to refinance is when your existing loan is expiring soon. When you only have a few payments left on your existing loan, it is usually best to finish paying off the current loan. Otherwise, extending the loan term for a new loan will likely cost more in fees and additional interest. If you’re already pretty far along in your current auto loan, it’s probably better to finish the deal with your current lender.
Another time to reconsider refinancing is if your car has depreciated significantly or your mileage is exceedingly high. In this case, the loan refinancing option may not benefit you. In these cases, the car may not hold the loan-to-value ratio needed for the credit union or other lender to approve financing.
Lastly, a poor time to refinance is when your current loan has an early payoff penalty. You’ll need to read your current loan terms to see if there are any prepayment penalties.
3. How soon after purchase can I refinance my car loan?
You can apply for refinancing at any time after your purchase. The best time to refinance your auto loan is when auto loan interest rates have dropped. The interest rate accounts for what percentage you are paying against the outstanding loan. This number is what people generally look at as a good loan (low %) or a bad loan (high %). Finding a better interest rate often drops your monthly payment considerably, making refinancing worthwhile.
Another good time for refinancing is if you have improved your credit score. If you had bad credit when you financed the vehicle and circumstances have changed, you should consider refinancing. In that situation, you’ll qualify for a better interest rate now that your credit score has gone up. Get a free online credit report to see what your current credit looks like.
Another good reason to look into refinancing is if you got a loan from a car dealership. Dealerships often have higher rates than a credit union or bank. Money FCU has auto refinance loan agents available for any questions you may have.
4. Will refinancing a car loan hurt my credit?
As is with any loan or a large purchase, it does affect your credit, but only slightly. At first, your credit score will take a small hit when you are shopping around for refinancing. Next, it will take another small dip when you accept a new loan. As a new obligation, your FICO scores drop slightly. However, if you regularly make timely monthly payments, then the adverse effects on your credit score are only temporary. In fact, keeping a regular, timely car payment boosts your credit score after a few months of stable payment history is shown.
5. How much money can I save with auto refinancing?
Several factors determine the amount of money you’ll save by refinancing. For instance, the current interest rates, value of the vehicle, length of the loan term, your credit score, and the overall total loan amount. Getting a lower interest rate often saves you money on your monthly payment.
By far, the best thing to do when shopping around for refinancing is to ask the new lender for a refinancing quote. Your personalized quote will take into consideration all of the necessary factors. After you receive the quote, investigate your financing options. Determine if the new loan is beneficial based on your current car loan payment, how much money you might save, or if extending the term to lower your payment makes sense.
Remember, don’t always choose the longest loan term in order to get a lower monthly payment. This extends the loan and increases the interest you pay over the length of the loan term. Do so only if you have a financial hardship that requires lower payments immediately. Otherwise, a shorter loan term saves you in accrued interest charges.
6. Do I need to have my previous cosigner on the loan in order to refinance my auto loan? Or, Can I remove my cosigner when refinancing?
This question can go both ways. So let’s take a closer look. Yes, you’ll need to have your cosigner sign in the refinancing of an auto loan if your credit has not improved and you still need their backing to apply for a loan.
On the other hand, if your credit has improved and you no longer need the backing of a cosigner, then you may remove them as a signer on the new loan application. In essence, the initial loan that bears their name as a cosigner gets paid off and their commitment is paid in full. You will now be solely responsible for the new auto loan.
7. The “how to” of refinancing your car loan.
First, get together any paperwork on your current loan. The new lender needs to know your payoff balance and number of payments remaining to provide you with a refinance quote. Have the general information about your car ready for the lender to determine its value. For example, year, make, model, mileage, and VIN. Additionally, it’s essential to know what the current interest rate you’re paying is so you can make an educated decision about refinancing your car loan.
Second, determine if you want to apply for the auto refinancing loan. Compare the quote you get from the new lender to your current loan. If you’re saving money by refinancing your auto loan, it’s a no-brainer.
Next, gather proof of employment and income, along with any personal information. Personal documents include drivers’ license and SS#. If you end up wanting to apply for the loan, you will need this information to complete the application.
Lastly, complete the loan process with the new lender. The new lender pays off the remaining balance of your original loan and you’ll begin making monthly payments to your new lender. Money FCU has online banking so you can make your car payment online anytime. Money FCU also offers automatic payments as an easy, no-hassle payment option. Money FCU even deducts 0.25% from your interest rate for opting for automatic payments! Whichever payment method you choose, you begin seeing savings instantly.
See how much you’ll save with Money FCU by refinancing your auto loan today!
Money FCU will provide a quote or answer any auto refinancing questions you have. Plus, we have a free rate lock that is good for 90 days with pre-approval. Get pre-approved for your refinancing and lock in your rate for 90 days. If rates go down, Money FCU always gives the lower rate. If they go up, you’re locked in to the lower rate! We also have online loan applications available where you can apply in the safety of your own home. You can apply, get approved for the loan, and sign for it without ever leaving your house. You can complete the loan from start to finish all online! How much money will you save by refinancing today?
Call or chat with us Monday-Friday, 9am-4pm EST. We’re here to help! You can also request a free refinance quote right online.