Auto Refinancing Tips & Scams
- Auto refinancing explained and how it saves you money.
- Why you should consider refinancing even if you have a low APR.
- Reviews of sites with low rates.
- How to check your credit and score before refinancing a loan.
- How to increase your chances on getting approval.
- How to get out of paying 21% APR to 25% APR even if you have bad credit.
What is Auto Refinancing?
It is one of the best kept secrets around for saving you money, but most people never think about it. You pay off your current car loan with a refinance loan from a different lender that has a lower APR.
How You Benefit
You lower your monthly payments and your interest rate drops. This can save you thousands and can allow you to pay off your car even quicker. It's like finding a wad of cash you didn't know you had in your clothes after doing the laundry. Use the money you save to pay off other debt.
Note: Most lenders will not refinance their own auto loans so you will need to apply with a different one.
Fact: You Don't Need an Appraisal
Many people erroneously believe an appraisal is required. Unlike a home loan where the value and equity is important, lenders only care about the balance left on your current car loan.
Auto Refinancing Example
Suppose you borrowed $16,500 for 60 months. Let's assume your credit was bad, you had no previous credit history or the dealer put you in a higher APR loan than you should have gotten. This happens quite a bit. Suppose the dealer "got you approved when no one else would" at 21% APR for a 60 months. Sound familiar? Here is an example of refinancing with another lender at 7% APR.
|Interest Rate (APR)||Monthly Payment||Total Interest On Car Loan|
Your current payment at 21% APR is $446.38 and your new payment at 7% APR is $330.63 so you save $6,945!
If you pay an extra $50 monthly principle more than the $330 you'll pay off the loan even quicker. See how powerful auto refinancing can be for you? Most people don't realize how bad high interest car loans are for your bank account and what a difference 1% makes. That $6,945 is better off in your bank account, not theirs. Of course your actual APR would depend on your credit rating. Not everyone gets the 7% or lower APR, but I'm sure it's got to be lower than what you're paying now.
It's very important to refinance early, because he interest is mostly paid in the earlier payments. Our examples here are based on savings only if you follow my advice during the first couple of months of the term. If you wait until the 4th year, your savings will be a lot less.
Who Should Refinance?
I like to use the 1% rule. After you buy your car, start watching the interest rates at sites like Capital One Auto Finance, Up2Drive and myAutoloan.com and see if you can find a rate at least 1% less than your current rate. Use the calculators on their sites to see how much you will save. You'll be astounded at how much money you just found.
Tips to ensure a speedy auto refinance loan approval
Pay close attention to these important points, because you would hate to get rejected for making a stupid clerical error.
- Applications need to be in the same names (with exact spelling) as the names on your current auto loan
- Have your car loan account number ready
- You must refinance more than $7500 - any less and it's not worth the lender's time
- Have all the vehicle information accurate - enter the year and model and VIN found on your dashboard or registration.
- Your won't be able to borrow more than the value of the car
Recommended Refinance Lenders
Capital One Auto Finance makes lowering your monthly car payment easy.
Step 1: Apply Online - There is no application fee and you'll get a response in minutes.
Step 2: Sign your loan contract online - Once approved you can review & sign your contract online and hassle free!
- Lower APR to your car
- Online Application, 15 min. response during business hours
- No application fees; no early payoff penalties
- Lower your current car payments
- Depending on other factors, Capital One may accept credit scores as low as 540
- Adding months to your loan term may increase your rate, so for your best rate try not to extend your term
- Vehicle is 7 years old or newer
- Your FICO Credit Score is 540-850 (other factors considered)
- You are refinancing between $7,500 & $30,000
- 24 to 72 Month Loan Term
Up2Drive (a division of BMW Bank of North America) offers highly competitive rates & superior customer service.
- Contact your existing auto lender & get payoff information
- Complete the Up2Drive online credit application
- Once approved, Up2Drive will send you a "Drive CheckTM"
- Mileage cannot exceed 75,000 miles
- No commercial vehicles and/or vehicles for business use
- Never an application fee
myAutoloan.com gets you up to 4 online loan offers in minutes to help you maximize your savings.
- Create your secure myAutoloan.com account & login
- Complete private, secure, confidential online application
- You will receive up to 4 loan offers in minutes
- Review your offers, compare & select the best offer for you
- No fees or obligations!