If you’re wondering whether it makes sense to refinance your car loan and “how soon can I refinance my car”, it’s important to understand how much money you’ll save and what to expect from the process. In this post, you’ll walk through questions to ask before refinancing as well as how to go about finding a new lender.
How much do you owe on your car?
The first thing you’ll want to do is figure out how much you owe on your car. You can refinance even if you have missed payments and are upside down on your car loan, but it’s still important to know how much money is owed before the refinance process begins.
You can also take advantage of this opportunity to get rid of any extra fees or penalties associated with late payments in order to save money on interest payments.
What is your credit score?
Your credit score is a number that indicates how likely you are to pay back a loan. It’s based on your history of paying bills and other kinds of debt, as well as the number of accounts you have open. According to financial experts like Lantern by SoFi, “If your credit score received a boost since you took out your original loan, banks may be willing to offer you a cheaper loan than you’d previously qualified for.”
Your credit score affects whether or not you can get approved for loans, and what sort of interest rates they’ll come with. If your score isn’t very high (say, below 700) or it’s been awhile since your last loan application, then refinance rates may be lower than they could be otherwise.
Are you upside down on your loan?
Being “upside down” means that the total amount owed on your auto loan is greater than the car’s actual value. When this happens, you’re said to be “underwater” and are required to pay off your entire loan balance before selling or trading in your car.
You can figure out if you’re underwater by simply taking a look at the monthly payment amount listed on your statement—if it’s higher than what it would cost for a new vehicle with similar features and options, then there’s a good chance that you’re upside down.
Have you made payments on time?
Your credit score is a key factor in determining whether or not you can refinance your car loan. If you have made payments on time and consistently maintained a low balance, then your credit score will most likely be higher than someone who has missed payments and accumulated high balances.
If you are making payments on time and paying down the balance of your loan, then there’s a good chance that you’ll be able to refinance sooner than someone with higher debt-to-income ratios.
How much equity do you have in your car?
You should know how much equity you have in your car. This is an important part of the refinance calculation, so make sure you know the value of your trade-in, what the value of your car is and how much money you owe on it. The amount that can be refinanced will depend on these factors as well as your interest rate and loan balance.
You should be happy that this article helps you make the right decision when it comes to refinancing your car loan. You know that there are a lot of factors involved in the decision, but you also know that once you’ve made it, you’ll be happy for years to come.
What did we learn?