Car and Auto Refinance Tips & Scams

What is auto refinancing? How do I benefit by auto loan refinancing?
Auto refinancing is one of the best kept secrets around for saving you money, but most people never thought of refinancing their car. Car refinance is the same as home refinance. When refinancing car loans, you pay off your current car loan with a refinancing car loan from a different lender that has a lower APR. This is good for you because refinancing auto loans makes your monthly car loan payments lower, and your interest rate drops, which can allow you to pay off the balance of your car loan even quicker. Record numbers of homeowners refinanced in 2001 and 2002, and now many car owners are realizing you can save thousands of dollars by refinancing auto loans too. Car refinancing has become a very popular trend with dropping interest rates. 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 credit card debt or accelerate your car loan payoff.

Note: Most lenders will not refinance their own auto loans. So if you plan to refinance your auto loan, you will need to look for a lender other than your current lender.

Fact: You don't need an appraisal to refinance your car loan
Many people erroneously believe an appraisal is required to refinance their auto loan. Unlike your home, which does require an appraisal because it is based on your equity in the home, auto refinancing is based on how much you need to pay off your current car loan, not on the value of the car.

Credit Crisis Alert
Due to the current condition of the financial markets, many people were forced into high APR car loans. If you are in this boat, you should apply for refinancing at sites like Capital One Auto Finance, Up2Drive or myAutoloan.com. You might be able to significantly lower your APR and monthly car payments.

The scary truth about your credit score
Your credit score has more of an effect on your life than you think. A bad credit score can cause you to pay much higher loan interest rates, and can adversely affect your ability to get a job and cause you to pay higher insurance premiums. Many people are unaware that insurance companies check your credit before selling you insurance.

Your credit score will NOT drop if you run your own credit report
Many people mistakenly think their credit score will drop if they run their own credit report. Salespeople keep you in the dark about you own credit report so they can use your ignorance to charge you higher interest rates. You can verify this urban legend about your credit score at Experian, Equifax or TrueCredit.

How To Get Your Credit Report
If you are going car shopping, get your credit report instantly online right now so you'll have it and apply for car loans online now so you'll know now whether you are qualified. DO NOT apply for a car loan unless you have your credit score in hand. You can get your credit report instantly online from Experian, TrueCredit or Equifax. Forget about the free annual credit report, it does not give you the credit scores that you need, you have to pay to get them. Be sure to get your credit score with the credit report. If your credit score is below 600, don't bother applying for a car loan until you repair your credit first. Learn how to repair credit at our other site DebtWizards.com.

It's absolutely the most important priority that a person with bad credit, paying a high APR, refinance their car loan to a lower APR.

It's true, most bad credit borrowers can indeed refinance to a lower APR, but many don't think to try because they were "programmed" or duped by the dealer into thinking they are stuck at 21-25% APR.

Real world auto refinancing example
Suppose you borrowed $16,500 for 60 months on your new Honda Accord. Let's assume your credit was bad, you had no previous credit, or the dealer lied about your credit and charged you a higher APR than you should have paid. This happens quite a bit. Suppose the dealer "got you approved when no one else would" at 21% APR for a 60 month car loan. Sound familiar? So you start paying off your car loan for a few months, then refinance your car loan with another lender at 7% APR.

Your current payment at 21% APR would be: around $446.38
Your new car loan payment at 7% APR is: around $330.63
You save $6,945!

Send in an extra $50 monthly principle more than the $330, and your loan will pay off even quicker. See how powerful auto refinancing can be for you? Most people have no concept of the time value of money, and just 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 your auto loan early, because with car loans, the interest is mostly paid in the earlier payments. The earlier your car loan is refinanced, the more money you save. Our examples here are based on savings only if you refinance during the first couple of months of a car loan. If you wait until the 4th year to refinance your car loan, your savings will be a lot less.

Who should refinance their auto loans? What APR % should you look to refinance a car at?
Anyone who did not get a 0% to 3% APR car loan from the carmakers should consider a car loan refinance. Even if you got a decent APR auto loan, you should consider car refinancing. I like to use the 1% rule. After you buy your car, start watching the auto refinancing interest rates at sites like Capital One Auto Finance, Up2Drive and myAutoloan.com looking for refinancing auto loan rates at least 1% less than your current car loan interest rate. Use the calculators on these car refinance lender sites to see how much it saves you to refinance your car. You'll be astounded at how much money you just found, and you'll stop the hemorrhaging in your bank account.

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.

• Auto refinance loan applications need to be in the same names (with exact spelling) as the names on your current auto loan. This is important because that is how your current auto loan is identified and found. Have your car loan account number ready. If you give them a name with a different spelling, they cannot find your current loan, and you get rejected. Sounds like a no brainer, but...
• You must refinance more than $7500. Any less and it's not worth the auto refinance company's time.
• It's also important to have all the vehicle information accurate so that Capital One Auto Finance, Up2Drive and myAutoloan.com can price out the car to make sure it meets Loan to Value ratio guidelines. Enter the year and model and enter the 17 digit VIN (Vehicle Identification Number), found on your dashboard or registration.
• Your auto refinance loan amount should not be higher than the value of the car. Just like home refinancing, where the bank won't lend you more than the value of the house. You might want to check your values first to make sure your car has retained a reasonable amount of value relative to the amount you still owe on it.

I already got a good APR car loan. Why do I need to refinance my car?
Suppose you already got a good 7% APR car loan. Here's another example with the same $16,500 loan for 60 months mentioned above:

Your car loan payment with 7% APR: $326.72
Your new payment when you refinance your car to 6% APR: $279.21
You save $463.72!

The above example shows you that even if you got a low APR you can benefit by auto loan refinancing. It also demonstrates just how much money lenders have been making off us all these years. Would you have thought in a million years that getting a 7% APR car loan was costing you $463 too much? In this day of stock market volatility, corporate accounting scandals, and watching your retirement account plummet, you need to empower yourself more, and take charge of every penny of your financial well being. Don't let the greedy lenders do it for you. Use the friendly lenders that we review here, like Capital One Auto Finance, Up2Drive and myAutoloan.com.

If you don't look into auto refinancing today, you could be throwing away thousands of dollars!

What about loan fees and early payoff penalties?
The "gentle" lenders that we recommend here like Capital One Auto Finance, Up2Drive and myAutoloan.com do not have any fees. No loan application fees, no points, no origination fees, and no early termination penalties. It's even in writing on their web sites. The only cost you might see is the small fee from your state to change the name of the lien holder on your car's title to the new lender. Other than that, there's no scams, the only thing you pay is the loan balance and interest. It's very seamless, completed in a few days, like you never even left your loan. The only difference is now your monthly car loan payments will drop, and the checks become payable to the new lender instead. You should be cautious about other auto loan refinance lenders not reviewed here who might have hidden fees or charge to process your loan. Also, carefully check your current car loan for any early payoff fees and penalties. It still may be beneficial to refinance even if there are some penalties involved. Each situation is different, so you need to do the math.