Requirements to refinance your car loan Advertiser Disclosure Advertiser Disclosure We are an independent, advertising-supported comparison service. Our goal is to help you make better financial choices by offering you interactive financial calculators and tools as well as publishing authentic and objective content. We also allow users to conduct research and compare information for free and help you make sound financial decisions. Bankrate has agreements with issuers such as, but not restricted to, American Express, Bank of America, Capital One, Chase, Citi and Discover. How We Make Money The offers that appear on this site are from companies that pay us. This compensation can affect the way and where products appear on the site, such as such things as the sequence in which they appear within the listing categories and other categories, unless prohibited by law. Our mortgage, home equity and other home lending products. This compensation, however, does not influence the information we provide, or the reviews that you see on this site. We do not contain the vast array of companies or financial offerings that might be open to you. MoMo Productions/Getty Images

5 minutes read. Published November 16, 2022

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Written by Bankrate Written by The article was created by using automated technology. It was then thoroughly checked and edited by an editor on our editorial team. The article was edited by Rhys Subitch Edited by Auto loans editor Rhys has been writing and editing for Bankrate since the beginning of 2021. They are committed to helping readers gain the confidence to control their finances by providing precise, well-studied information that breaks down otherwise complicated topics into digestible pieces. Review by Mark Kantrowtiz by Nationally well-known student financial aid expert Mark Kantrowitz is an expert on student financial aid as well as the FAFSA, scholarships, 529 plans, education tax benefits and student loans. The Bankrate guarantee

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You have money questions. Bankrate has the answers. Our experts have been helping you manage your finances for more than four decades. We strive to continuously provide our readers with the professional advice and tools needed to succeed throughout life’s financial journey. Bankrate adheres to strict standards standard of conduct, which means that you can trust that our content is honest and precise. Our award-winning editors and journalists produce honest and reliable content to help you make the best financial choices. Our content produced by our editorial team is factual, objective and is not influenced through our sponsors. We’re honest about the ways we’re capable of bringing high-quality content, competitive rates, and useful tools for our customers by explaining how we earn our money. is an independent, advertising-supported publisher and comparison service. We receive compensation for the placement of sponsored products and, services, or by you clicking on specific links that are posted on our site. So, this compensation can impact how, where and in what order products appear within listing categories, except where prohibited by law. This is the case for our mortgage or home equity products, as well as other home loan products. Other factors, like our own website rules and whether a product is offered in the area you reside in or is within your own personal credit score can also impact the way and place products are listed on this site. While we strive to provide a wide range offers, Bankrate does not include details about every credit or financial product or service. Refinancing your current vehicle loan is often based on whether you’ll save money in the long run, whether in a month-to-month or overall. However, before you can sign a new loan it is essential to confirm that you and your vehicle fit the requirements. While requirements vary between lenders, keep an eye out for the requirements listed below. What are the requirements to take out an loan to refinance your car Be aware of these elements when you’re considering an auto loan. Time left on loan The length of time remaining to your loan is a standard qualification requirement. Typically, lenders require you to be current on your loan payment, have paid at least six months of your loan and have at least six months left. This will allow the lender to see that you’ve established a history of payments — or still have enough to earn a profit on interest when you’re done the repayment. If you’ve taken out a 60-month auto loan and are three months into paying it off, you likely won’t be in a position to refinance it for another couple of months. If you’ve already made 54 payments already it is likely that you’ll need to make it through the process of paying the balance off instead of refinancing it. Rest of the amount loan amounts differ by lender and lender, but you can anticipate that you will need between the amount of $3,000-$5,000 left on your loan. Because refinancing is basically borrowing a new loan , lenders don’t want to give small amounts since they won’t be able to get as much profit from these. If you’ve purchased an expensive vehicle it is possible that you won’t be able to refinance immediately. Finding auto refinance loans for over $50,000 can be a challenge. Model year and miles If you purchased a used vehicle and are looking to refinance your loan — or you’ve already accumulated a number of miles — it’s possible that you won’t be in a position to. Most lenders will have a cap of 100,000 to 150,000 miles. While lenders don’t set an age limit, you may not qualify if you have an older car. In general, lenders establish the minimum age at 10-years-old. But some may require a vehicle that is less than eight years of age to be able to refinance the loan. Credit score Like any loan, your will be the primary factor. Refinancing is usually a good idea if you have low interest rates on your car loan and have since raised your score on credit. Anything below 600 will not net you a better rate and could , especially in the event that you lengthen your loan duration to lower monthly payments. You can for free online. If you’re not happy with where it is or want it to be, take a look at reworking it before making an application for refinancing. Requirements for debt-to income ratios Your debt-to-income ratio is a measure of your debt against your income. It is usually expressed in terms of an amount. The acceptable range varies between lender to lender but generally is lower than 50 percent. The process of paying down outstanding debts is the best way to lower your DTI should the lender considers it to be excessive. Reducing your other installment loans or credit card bills may help prove your financial responsibility to a prospective lender. You might want to use a tool to determine your DTI. So, you’ll be aware of how much debt you need to settle before applying. How do you refinance your car loan Refinancing a car loan is relatively simple. It is the same process procedure as getting a brand new car loan. Here are to help streamline the process: Search for the best loan. Apply for with at least three lenders, the same way you would do for a new auto loan. You must apply to the loan. Complete all the information requested -about your identity, work, current loan and car — and submit the required documents. Receive your loan funds. The lender will then send you the money and pay you your existing lender directly. It could take anywhere from a few days to several weeks, therefore continue making your payments. Begin to pay off your new loan. After your loan is funded then it’s time to begin paying off the loan. Be punctual with your payments and send them to the correct lender. Find out the best way to use your savings. Once you’ve repaid the new loan and have repaid it, you can utilize the savings to enhance your financial position. Consider putting money toward a , debt repayment or . Refinancing pros and cons for your auto loan Before refinancing, weigh the . Pros You may secure a lower interest rate. The lender refinancing your loan may provide you with a lower rate cost, thereby reducing the amount you pay over the life of your loan. A lower rate is more likely when your credit score is improving or you borrowed through a dealership. Your monthly installment could be reduced. Extending your term or lowering the interest rate could reduce your monthly payments. Be careful, though. Extension of your auto loan term will also cost additional interest. Cons Your interest rate could increase. If you’re not eligible for a lower interest rate take into consideration increasing your score on credit before applying. It is possible to extend the duration of your loan and also the interest you pay. Even if the rate you pay may be less, you could nonetheless increase the amount interest you pay if you decide to extend the loan time. The longer it takes you to complete the repayment of your vehicle in full, the more interest you’ll accrue. It’s possible to be upside down on your loan. If you extend the loan period when refinancing, the amount you have to pay could exceed the vehicle’s value due to depreciation. This is known as being upside down in your loan and could make it challenging selling or refinancing your vehicle without incurring losses. What to consider when refinancing your auto loan There are some important questions to consider prior to deciding whether or not to refinance your car loan. Are your current rates reasonable? If you’re already paying a competitive interest rate, you’ll want to compare current rates to make sure the new loan is worthwhile. The Federal Reserve increased the multiple sessions in a row, which could mean auto loan rates will increase over the next year. Bankrate tip

You should compare rates from different lenders to determine which offers you the best price. Utilize a calculator to compare your potential monthly payments as well as the total interest rate with your current loan.

What is your current vehicle worth? Prior to refinancing your car loan be aware of the ratio of your loan to value. The ratio is a measure of how much you owe. If you are close to having more debt on your vehicle than its value You may wish to refinance your loan to the shorter duration. What are the terms for the loan? It is important to know the essential specifics of your current loan when you are considering refinancing. This includes the loan APR, the length of loan, duration, time left and monthly payment. Also, you can look through the loan documents to find out more about late charges and . The next steps refinancing your car loan is a smart financial move, but you should do a few things to plan for the process. Take into consideration your credit score, the car’s age and mileage, the amount you owe to your vehicle, and your ability to make the payments for the new loan. Based on your financial circumstances, consider instead asking about to make your auto loan payments more affordable. Find out more


Written by This article was produced using automated technology, that was then thoroughly edited and checked by an editor on our editorial team. Edited by Rhys Subitch Edited by Auto loans editor Rhys has been writing and editing for Bankrate since the end of 2021. They are passionate about helping readers gain confidence to manage their finances by providing concise, well-researched, and clear information that breaks down otherwise complex topics into manageable bites.

Auto loans editor

Reviewed by Mark K. Kantrowitz Reviewed by Nationally acknowledged expert in student financial aid Mark Kantrowitz is an expert on student financial aid, the FAFSA, scholarships, 529 plans educational tax benefits, along with student loans.

Nationally recognized student financial aid expert

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