Common car refinancing mistakes to avoid Advertiser Disclosure Advertiser Disclosure We are an independent, advertising-supported comparison service. Our aim is to assist you make better financial choices by providing you with interactive financial calculators and tools as well as publishing reliable and original content, by enabling you to conduct your own research and evaluate information for no cost to help you make informed financial decisions. Bankrate has agreements with issuers such as, but not limited to American Express, Bank of America, Capital One, Chase, Citi and Discover. How We Earn Profit The deals that are advertised on this site are from companies who pay us. This compensation could affect how and where products are displayed on this website, for example, for example, the order in which they may appear in the listing categories in the event that they are not permitted by law. This applies to our loans, mortgages,, or other home loan products. This compensation, however, does affect the information we publish, or the reviews appear on this website. We do not include the vast array of companies or financial offers that may be accessible to you. Tom Werner/Getty Images
3 min read . Published 24 February 2023
Written by Rebecca Betterton Written by Auto Loans Reporter Rebecca Betterton is the auto loans reporter for Bankrate. She is a specialist in helping readers to navigate the ways and pitfalls of borrowing money to purchase cars. The article was edited by Rhys Subitch Edited by Auto loans editor Rhys has been writing and editing for Bankrate since the end of 2021. They are committed to helping readers gain the confidence to control their finances through providing clear, well-researched facts that break down complicated topics into bite-sized pieces. The Bankrate guarantee
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You have money questions. Bankrate has answers. Our experts have been helping you master your finances for over four years. We strive to continuously give consumers the professional guidance and tools required to make it through life’s financial journey. Bankrate follows a strict policy, which means you can be confident that our information is trustworthy and accurate. Our award-winning editors and reporters create honest and accurate content to help you make the right financial decisions. The content we create by our editorial staff is objective, factual and is not influenced through our sponsors. We’re transparent regarding how we’re capable of bringing high-quality content, competitive rates, and useful tools for you by explaining how we earn our money. Bankrate.com is an independent, advertising-supported publisher and comparison service. We are compensated in exchange for the placement of sponsored products andservices or through you clicking certain hyperlinks on our site. Therefore, this compensation may impact how, where and when products are listed, except where prohibited by law. This is the case for our mortgage or home equity products, as well as other home lending products. Other factors, like our own website rules and whether the product is offered in the area you reside in or is within your own personal credit score could also affect the way and place products are listed on this website. We strive to offer an array of offers, Bankrate does not include details about every credit or financial item or product. If you are having trouble making your current loan payment, replacing the current auto loan with a new one can be an excellent way to save money and remain behind the wheel of your vehicle. However, there are some typical mistakes to avoid so that you don’t end up in another financial bind. Seven mistakes to avoid when refinancing your vehicle. Avoid these common traps when refinancing your vehicle loan. 1. Don’t check the refinancing requirements. Lenders hold specific in refinancing. Check for the criteria pertaining to your vehicle’s mileage, age and the amount left on the loan. For instance, lenders usually require a minimum of six months’ worth of payments for the loan and a balance of between $3,000 and $5,000 to refinance. Bankrate tip
You can find refinancing requirements from lenders’ websites or Bankrate’s .
2. Do not contact your current lender initially. Although your current lender might not have the lowest rates, it is still the most effective place to begin. Before exploring refinancing options outside your current lender, it is wise to approach them and discuss your situation with them to determine if they are able to help. Certain lenders provide this service , that alters the terms, the due date for payments or interest rate to provide borrowers with financial relief. Tips from Bankrate
Even if you still follow through with refinancing the loan, it is possible that they can offer you a better deal than the new lender could.
3. Extending your loan term too long The purpose of refinancing is to cut costs, but when you extend your loan too much, you could spend more money over the loan’s duration. While a will mean lower monthly payments, you will also pay more interest. Tips from Bankrate
Before adjusting your term, take advantage of auto refinances to confirm you will save money.
4. Do not take your credit into consideration Like most situations with finance, credit is used as the main factor for approval. So, work to improve and before refinancing your loan. You’ll have a better chance to get the loan you want and get more money in the end. loan overall. If your credit score is 670 or more usually qualifies for borrowers with the highest interest rates. Tips from Bankrate
Check your credit ahead of loan applications by using AnnualCreditReport.com.
5. Shopping with just only one lender Similar to when shopping for your initial auto loan We suggest comparing at least three lenders. Therefore, even though signing on the initial loan offer may be tempting, not all lenders are created equally. Ultimately, the lower your interest rate the more you’ll save on your car payment. You want to ensure you’re getting the most competitive rate available. Tip for banks
Compare the rates currently that are offered by a variety of lenders. Pay attention to eligibility requirements, repayment options and how it compares to your current loan.
6. Becoming upside down on your loan Before refinancing, check whether the equity on your car is with a . Equity is the amount by which the vehicle’s value exceeds the amount you owe on the auto loan. If you are owed more than the value of your vehicle, or hold negative equity refinancing is not the best choice. Tips from Bankrate
Don’t refinance a vehicle you’re not able to pay for. Check where your may be in excess and calculate the expected expenses prior to signing the new loan.
7. Giving up after your first rejection loan refinancing requirements differ from lender to lender, so the fact that you’ve been denied by one lender doesn’t mean that you’ll be rejected by all. If you’re asking, “Why can’t I refinance my vehicle?” you have the right to question for the lender in accordance with the (ECOA). They have to explain why your application was not approved. Bankrate tip
Knowing the reason you were rejected can help you increase your odds of approval for the next time. If, for instance, your credit score is low it is possible to work on improving it before applying next time.
The bottom line is that refinancing your car loan could be risky It is an excellent way to lower the cost of your monthly payments and keep paying for your car. Make sure to keep these mistakes in mind, and keep up-to-date with current information to ensure you walk away with the best loan for your requirements.
Written by Auto Loans Reporter Rebecca Betterton is the auto loans reporter for Bankrate. She specializes in assisting readers to navigate the ways and pitfalls of borrowing money to buy a car. Edited by Rhys Subitch Edited by Auto loans editor Rhys has been editing and writing for Bankrate since the end of 2021. They are committed to helping readers gain the confidence to control their finances by providing precise, well-researched and well-informed details that cut otherwise complicated topics into digestible pieces.
Auto loans editor
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