It’s been shocking to learn that the majority of my peers don’t know about refinancing auto loans. Typically, the said yes to whatever financing option was presented to them by the dealership and have stuck with it. They didn’t realize that refinancing your auto loan could significantly reduce your monthly expenses. It’s actually fairly simple to do. There are free online tools that will provide you with financing options from multiple lenders, and it only takes about 5 minutes.
Is Refinancing Right for You?
To assess whether or not refinancing is right for you, you first need to understand the details of your current loan. How many payments have you made and how many do you have left? How much interest have you paid so far and how much interest remains? What is your current rate and is that higher or lower than today’s current rates? And last, you need to understand the current value of your auto. These are things that will help you understand if refinancing is right for you.
The second step is to review your options. Companies like Standard Auto Financing can quickly provide you with loan options that are specific to your situation. Your current income, your car’s make and model, location, and other items all play a factor in determining your offer. If you are interested in saving money every month, then exploring your auto loan options is a good idea (and free).
Can I take Cash Out?
Even fewer people know that in some cases, you can refinance your car loan and take cash out at the same time. The cash can be used to pay off bills, taxes, liens, take a vacation or get some projects around the house completed. There are two main factors in determine if you qualify.
The first is the current value of your car vs. the amount you own on your current loan. If you owe 25k and your car is worth 20k, you are considered upside down and won’t be able to take any additional cash out of the loan. But if your car is worth 25k and you only owe 10k, then your “loan-to-value” ratio would likely quality.
The second factor is your credit score. You’ll likely need a credit score of 650 and above to quality. If you don’t know your score, there are free online tools from sites like Credit Sesame and Credit Karma who provide your credit score for free. Fix any negative problems before you seek your cash-out auto refinance.
When Should I Refinance?
Every situation is different and the first step to determine if refinancing is right for you is to take a quick look at the current market and your financial position. Consider refinancing your auto loan if:
- If interest rates have decreased since you bought your car
- Your credit score has improved, which could mean you qualify for a better rate.
- You financed your car through a dealership, where rates are often higher that rates from auto finance companies.
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