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 tools and financial calculators, publishing original and objective content. We also allow users to conduct research and compare data for free to help you make financial decisions with confidence. Bankrate has agreements with issuers including, but not limited to, American Express, Bank of America, Capital One, Chase, Citi and Discover. How We Earn Money The deals that are advertised on this site come from companies that pay us. This compensation could affect how and where products appear on the site, such as such things as the sequence in which they appear within the listing categories, except where prohibited by law. Our mortgage, home equity and other home lending products. However, this compensation will affect the information we provide, or the reviews that you see on this site. We do not cover the universe of companies or financial deals that might be accessible to you. Tom Werner/Getty Images
3 minutes read. Published on February 24, 2023.
Written by Rebecca Betterton Written by Auto Loans Reporter Rebecca Betterton is the auto loans reporter for Bankrate. She specializes in assisting readers in navigating the details of taking out loans 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 passionate about helping readers gain confidence to take control of their finances through providing clear, well-researched facts that break down complex topics into manageable bites. 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 years. We strive to continuously give our customers the right advice and tools needed to be successful throughout their financial journey. Bankrate follows a strict policy, which means you can be confident that our content is honest and accurate. Our award-winning editors, reporters and editors produce honest and reliable information to assist you in making the right financial choices. The content we create by our editorial staff is truthful, impartial and is not influenced through our sponsors. We’re honest about the ways we’re 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 placement of sponsored products or services, or through you clicking specific links on our site. So, this compensation can affect the way, location and in what order products appear within listing categories in the event that they are not permitted by law. We also offer mortgage, home equity and other home lending products. Other factors, like our own rules for our website and whether a product is offered in the area you reside in or is within your personal credit score may also influence the manner in which products are featured on this site. While we strive to provide the most diverse selection of products, Bankrate does not include information about every financial or credit products or services. If you’re having trouble paying your current loan payments, — changing your current auto loan by a fresh one a great option to save money while you remain behind the wheel of your vehicle. However, there are some typical mistakes to avoid in order to ensure you don’t find yourself in yet another precarious financial spot. Top 7 car refinancing mistakes Avoid these common pitfalls when refinancing your car loan. 1. Don’t check the refinancing requirements. Lenders hold specific in refinancing. Check for requirements pertaining to the car’s mileage, age and the amount left on the loan. For instance, lenders typically require at least six months’ worth of payments for your loan and a balance between $3,000 to $5,000 to refinance. A tip from the Bankrate
There are specific refinancing guidelines on the lenders’ websites or Bankrate’s .
2. Not checking with your current lender initially. Although your current lender might not have the most competitive rates, it is still the best place to start. Before exploring refinancing options outside the current lender It is recommended to approach them and discuss your situation with them and see if they could help. Some lenders offer , which changes the conditions, the payment due date or interest rate , to help borrowers get financial relief. Tips from Bankrate
Even if you don’t follow the process of refinancing your loan, it is possible that they can offer you more than an existing lender could.
3. Intending the loan term too much Refinancing aims to reduce costs, however should you extend your loan too much it could cost you more money over the loan’s duration. While a will mean lower monthly payments but you’ll also be paying more interest. Tip from Bankrate
Before term adjustment make use of auto refinances to ensure you save money.
4. Not considering your credit Like most situations with loans, the credit score is used as the main factor for approval. So, work to improve prior to refinancing your loan. You’ll have a better chance to be eligible for the loan and get a better loan overall. A credit score of 670 or greater generally qualifies borrowers to the most favorable interest rates. Tip from Bankrate
Check your credit ahead of loan applications by using AnnualCreditReport.com.
5. Just shopping with only one lender Just as you would in the process of obtaining your first auto loan We suggest comparing at least three lenders. Therefore, even though signing on the first loan offer might be tempting, not all lenders are made equal. In the end, the lower your interest rate, the lower your car payment. You want to ensure you’re getting the best deal available. Bankrate tip
Compare the current rates offered by a range of lenders. Pay attention to approval requirements, repayment options, and how it compares to your current loan.
6. Insolvency on your loan Before refinancing, make sure you know whether the equity on your vehicle is by comparing it to an . Equity is the amount by which the vehicle’s value exceeds the amount you have to pay on the auto loan. If you owe more than what your car is worth or have negative equity refinancing is not the best choice. Bankrate tip
Do not refinance a car 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. Refusing to accept your first rejection loan refinancing requirements vary from lender to lender Therefore, even if you’ve been rejected by one lender doesn’t mean you’ll be rejected by all. If you’re thinking, “Why can’t I refinance my car?” you have the right to question your lender under the (ECOA). They must explain to you the reason your application was denied. Bankrate tip
Knowing why you were denied can help you increase your odds of approval in the future. For example, if the credit rating of yours is low it is possible to work on improving it before applying again.
The bottom line: While refinancing your vehicle loan can come with risks, it is a great way to lower the cost of your monthly payments and keep affording your vehicle. Make sure to keep these mistakes in mind, and keep up-to-date with current information to ensure you walk away with the most suitable loan to meet your needs.
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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 a car. Edited 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 take control of their finances with precise, well-researched and well-informed information that breaks down complicated topics into digestible pieces.
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