1. What is an auto refinance loan?
2. How it works?
3. Reasons for refinancing your auto loan
4. Requirements for auto refinance
5. Possible dangers
6. Does it cost money?
7. How much money will be saved?
8. Making a down payment
9. What is the largest amount you can refinance?
10. What amount should you apply for?
11. How long does an auto loan last?
12. How long does the car loan refinance process take?
13. Can you have a co-signer on your loan?
14. Is car insurance necessary?
15. How to Choose an Auto Loan Refinance Company?
16. Make Your Decision
17. Are auto refinance loans becoming popular?

What is an auto refinance loan?

An auto refinance is a loan that pays off your existing auto loan, similar to a mortgage refinance, but with a much simpler and faster process.

How it works?

Your new lender pays off your old loan and the title to your vehicle is transferred to your new lender.

Reasons for refinancing your auto loan

There are two reasons you would want to refinance your car loan. The first is to save money. By lowering your interest rate and not extending the loan length or term, you save money over the life of the loan. By lowering your monthly payments you might have some extra spending money at the end of each month or finally be able to afford your car note payments. The second reason for car refinance is to lower your car payments by extending the term of the loan. It will take longer to pay off but you will have smaller car note to pay each month. This option can be helpful for consumers with bad credit. Both of these options can be used together to fit your situation.

Requirements for auto refinance

Not all auto loans will qualify for refinancing. Most lenders require you to have at least $7,500 due on your current loan in order to refinance. There are also common restrictions on the age of the car and the car’s mileage. Plus, you may need to have a credit score above a certain level to qualify for a good refinance rate.

Possible dangers

While auto refinancing can help you save a lot of money in some situations, it may not always be a good decision. If you are thinking about refinancing, be sure to include all the fees and costs in your savings calculations. The fees required for your new loan could outweigh your savings. Be aware that a refinance may extend the term of your loan in order to reduce your monthly payments. This could result in increased costs over the life of your loan.

Does it cost money?

Most reputable lending companies do not charge to apply for auto refinance. There may be some fees associated with the actual car refinancing but they are usually minor compared with the amount of money you can save. Auto finance lenders that charge an upfront fee just to apply should be avoided. Lenders should want to run your application as it is the only way they are going to get your business and make money from the auto loan interest rate.

How much money will be saved?

The amount of money you will save each month depends on many factors. For most consumers with bad credit and high interest auto loans, lowering the interest rate will be the main factor. All other things being equal, lowering the interest rate a few points can save thousands over the life of the auto loan. Another option that can be helpful is to extend the length of the auto loan. Coupling this with a lower interest rate can drop the monthly car payments dramatically. Of course you will be paying off the refinance loan over a longer period of time but the lower monthly car payment may make the difference between being able to afford the car and having your car repossessed. Each situation is unique and the auto loan refinance lender will work with you to determine what works best for your particular situation.

Making a down payment

While requiring a down payment is not a common practice, some finance companies do require a down payment. If your application is approved, the information will be provided by the lender before you sign any documents.

What is the largest amount you can refinance?

For auto refinance loans the largest amount that can be financed is generally $75,000. This maximum will vary among auto lenders, however most consumers will find that their current loan payoff will fit into most lenders criteria. As for the minimum auto loan refinance amount, $7,500 tends to be the norm. Auto lenders must make it worth their time and expense and usually won’t refinance a car with a payoff less than this.

What amount should you apply for?

It is suggested that you apply for a loan greater than your existing loan to have a bit of flexibility. The extra money can be used for any purpose, although a good suggestion is to put the money back into the car for repairs or through purchasing an extended warranty. You want to make sure that your investment is still running when you make your last payment. This is especially critical if you extend the term during auto refinance as you will be paying off the loan for a longer period of time.

How long does an auto loan last?

How long an auto loan lasts or its “term” depends on your car loan agreement. Common auto refinance loan terms are 36, 48, 60 or even 72 months. You can work with the lien holder to find a term that works for you. Remember that the longer the car loan term, the lower the car payments should be.

How long does the car loan refinance process take?

Once you find a lender or a company that’s going to help then you have to get approved. Approval only takes a few minutes or a few hours. If your application is incomplete or contains incorrect information, the lender will contact you to correct the mistakes. In general, applying for auto refinance is a quick and simple process.

Can you have a co-signer on your loan?

Yes, you are usually allowed to have a co-signer. Having a co-signer greatly increases your chances of getting approved for car refinance. This option is especially useful if you have bad credit or don’t make the minimum monthly income. Most auto refinance car companies allow you to have a loan co-signer.

Is car insurance necessary?

Having full coverage car insurance is a must. Like most auto loans, a car refinance loan is secured by the vehicle. If the car is stolen, involved in an accident or otherwise damaged, then you would be required to repay the loan without use of the vehicle or its market value. Lenders know quite well that repayment under such circumstances is usually too great a burden for the borrower and will have a difficult time being repaid on the loan. Requiring insurance protects both the lender and the consumer.

How to Choose an Auto Loan Refinance Company?

When choosing a refinance car loan company, consider all the facts so that you can get the best rate possible. Do your homework first. Research auto lenders online and see what they have to offer; just don’t base your decision on what you heard somewhere or what a friend told you. If you know anyone who has ever refinanced a car, ask them details about the company they went with. Ask them to highlight the good and bad points about their auto lender company and be sure to ask them how much they lowered their car payment and how much they ultimately saved with auto loan refinance. These are essential things to consider when refinancing your car. In the end you can make your decision based on the facts you have come up with. You can always go online and receive free quotes from several companies for what they have to offer on auto refinancing. Take advantage of it. Online lenders are a great way to go due to this fact. They also have the benefit of faster application processing, because everything is digital for the beginning, they are able to immediately run it through their loan decision computers.

Make Your Decision

Now that you have done your homework you are ready to apply for the auto refinance loan. The application is usually not very long and you already know most of the information you will need. One item that you will need to get off your car or from your current loan documents is the VIN number. This vehicle identification number gives the lender the complete information they need about your car. It might also be helpful to write down the cars’ mileage, this number does not need to be exact but must be within 1000 miles of the actual reading.

Are auto refinance loans becoming popular?

Yes, they are. A growing number of consumers are choosing to refinance their existing auto loans, since auto loan interest rates have been at historically low levels.