Common car refinancing mistakes to avoid Advertiser Disclosure Advertiser Disclosure We are an independent, advertising-supported comparison service. Our goal is to help you make better financial decisions by offering interactive financial calculators and tools as well as publishing reliable and original content. We also allow you to conduct research and evaluate information for no cost and help you make financial decisions with confidence. Bankrate has agreements with issuers including, but not restricted to, American Express, Bank of America, Capital One, Chase, Citi and Discover. How We Earn Money The offers that appear on this site are from companies that compensate us. This compensation may impact how and when products are featured on this website, for example for instance, the sequence in which they appear within the listing categories, except where prohibited by law. Our mortgage, home equity, and other home loan products. However, this compensation will have no impact on the information we publish, or the reviews that you read on this site. We do not cover the entire universe of businesses or financial offerings that could be accessible to you. Tom Werner/Getty Images
3 minutes 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 with the details of borrowing money to purchase cars. Written by Rhys Subitch Edited by Auto loans editor Rhys has been writing and editing for Bankrate from late 2021. They are committed to helping readers gain the confidence to control their finances through providing concise, well-researched and informative facts that break down complicated subjects into digestible pieces. The Bankrate promises
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You have money questions. Bankrate has answers. Our experts have been helping you manage your finances for more than four years. We are constantly striving to provide consumers with the expert guidance and the tools necessary to make it through life’s financial journey. Bankrate adheres to strict standards standard of conduct, which means that you can be sure that our information is trustworthy and accurate. Our award-winning editors and journalists create honest and accurate information to assist you in making the right financial choices. The content we create by our editorial staff is objective, factual and is not influenced from our advertising. We’re transparent about how we are able to bring quality content, competitive rates, and helpful tools to you , by describing 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 and, services, or through you clicking certain links posted on our website. Therefore, this compensation may impact how, where and in what order items appear in listing categories and categories, unless it is prohibited by law. This is the case for our mortgage or home equity products, as well as other products for home loans. Other elements, such as our own website rules and whether or not a product is available in your region or within your personal credit score can also impact how and where products appear on this site. We strive to offer the most diverse selection of products, Bankrate does not include the details of each credit or financial product or service. If you are having trouble paying your current loan payment, changing your auto loan with a brand new one the best way to save money and continue to drive your vehicle. But there are some common mistakes to avoid so that you don’t end up in yet another precarious financial spot. The top seven mistakes in refinancing your car Avoid these common pitfalls when refinancing your car loan. 1. Don’t check the refinancing requirements. Lenders are strict regarding refinancing. Check for the criteria pertaining to your vehicle’s age, mileage and the remaining balance on the loan. For instance, lenders typically require a minimum of six months’ worth of payments on the loan and a remaining balance between $3,000 to $5,000 to refinance. Tips from Bankrate
You can find specific refinancing requirements on lenders’ websites or Bankrate’s .
2. Don’t contact your current lender initially. Although your current lender may not offer the lowest rates, it’s the best place to start. Before looking into refinancing alternatives outside your current lender, it is wise to reach out and discuss your situation with them to determine if they are able to help. Some lenders offer this, that alters the conditions, the payment due date or interest rate to help borrowers get financial relief. Tip from Bankrate
Even if you still follow through with refinancing your loan It is possible that they can offer you a better deal than an existing lender could.
3. Extending your loan time too much. Refinancing is a way to cut costs, but when you extend the term of your loan to a large extent, you could spend more money over its lifetime. While it could mean lower monthly payments, you will also pay more interest. Tip from Bankrate
Before adjusting your term Take advantage of an auto refinance to confirm you will save money.
4. Do not take your credit into consideration As with most cases regarding finance, credit serves as the main determinant for approval. Therefore, you must improve your credit and prior to you refinance your loan. You’ll have a better chance to receive the available and leave with a better loan overall. If your credit score is 670 or greater typically qualifies borrowers for the highest interest rates. Tips from Bankrate
Check your credit ahead of loan applications by using AnnualCreditReport.com.
5. Just shopping with only one lender Just as you would when shopping for your initial auto loan We suggest comparing at least three different lenders. So, while signing off on the first loan offer may be tempting, not all options are all created equally. In the end, the lower your interest rate, the more you’ll save on your car payment. You want to ensure you’re getting the best deal that is available. Tip for banks
Compare the current rates offered by a range of lenders. Pay attention to conditions for approval, the repayment options, and how it compares to what you currently have on your loan.
6. Being upside down on your loan Before refinancing, make sure you know whether the equity on your car is by comparing it to an . Equity is the sum by which the value of your vehicle is greater than the amount you have to pay for the loan. If you are owed more than the value of your vehicle or you have equity that is negative, refinancing is likely not the best choice. Tips from Bankrate
Do not refinance a car you aren’t able to afford. Check where your may be in excess and calculate the expected costs before signing off on an additional loan.
7. Refusing to accept your first rejection Auto loan refinancing guidelines differ from lender to lender, so just because you were rejected by one doesn’t mean you’ll be rejected by all. If you’re asking, “Why can’t I refinance my car?” you have the right to inquire with your lender to explain the reasons under the (ECOA). They must explain to you the reason your application was not approved. Bankrate tip
Knowing the reason you were rejected will help improve your chances of getting approval later on. If, for instance, you have a credit score that is low, you can work towards improving it before applying again.
The bottom line While refinancing your car loan could be risky It is an excellent method to cut down on the cost of your monthly payments and keep financing your vehicle. Make sure to keep these mistakes in mind and be up-to-date with current information for you to be sure you leave with the most suitable loan for your requirements.
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 buy an automobile. Written 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 take control of their finances through providing clear, well-researched details that cut complex subjects into bite-sized pieces.
Auto loans editor
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