Refinance Car Loan
With the ever-increasing demand of every day life, auto ownership has shifted from a simple luxury to a essential necessity; however, excessive auto prices make cash purchasing unaffordable. Even auto financing is not an affordable solution because of the high monthly installments and down payment. It seems like only people with excellent credit can qualify for low auto financing. Those having less than perfect credit cannot qualify for low or even reasonable auto financing.
All of you must have probably heard of auto refinance before. Or simply refinance.
The term "refinance" actually refers to a financial situation wherein a borrower finds financing to pay off present loan.
Refinance is often put into practice in home buying. In fact, refinancing is one of the most popular methods of getting financing for a home loan. With auto refinance, the same thing applies. Auto refinance is mainly paying off one loan with a new loan. The objective of auto refinance is to allow the borrower to save some money from the monthly loan obligations. And as such, it is one of the best kept secrets in the financing industry. For years now, people have refinancing their homes and saving money. However,the practice of refinancing car loans has yet to be indulged by most. Why?
Perhaps the reason is that auto loans generally behave differently from home
loans and people are naturally skeptical about new methods. In spite of all this, auto refinance is still a good choice, provided that the situation is right.
When to get an Auto Refinance Loan
The only way for auto refinance to work is if you get it when the interest rates are low. Mortgage rates is inter related to interest rate.Therefore, if interest rates are low, then it's likely that mortgage rates are low also. Low mortgage rates typically mean low monthly repayments and this then is the situation when you can get Auto refinance.
Only few people really understand the time value of money. Keep in mind that the longer time frame or EMI you have for any loan, the bigger amount of money you actually spend for it. Thus, by the end of the loan period, you would have paid more money on interest than on the principal. This is why auto refinance is important for it is one of the few methods that could help you minimize loan costs and maximize your savings.
Who can benefit from Auto Refinance?
Almost anyone with a loan to his name can benefit from auto refinance. You just give in the details and the Refinance company pays off your original loan and get Refinance with lower interest rate. Even car buyers with bad or good credit can obtain auto refinance as a way for them has been created to help those who have bad credit find the credit they deserve!
You don't need an appraisal to refinancing car loans
Many people erroneously think an appraisal is required for to refinance their auto loan. Unlike a house loan, which does require an appraisal because it is based on your equity of the house, auto refinancing is based on how much is needed to pay off the current car loan and not on the value of the car.
It's very important to refinance your auto finance early, because with car finance, the interest is mostly paid in the earlier payments. The earlier your car finance is refinanced, the more money you save. There are many examples which show that there is 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 car loans? What APR % should you look to refinance a car at?
Any person who did not get a 0% to 3% APR car finance from the carmakers should consider a car loan refinance. Even if a decent APR auto loan is there car refinancing should be considered. You can use the 1% rule. After buying the car, start watching the auto refinancing interest rates and start looking for refinancing auto loan rates at least 1% less than the current car loan interest rate. Calculate the interest on these car refinance lender to see how much is saved from refinancing the car. You'll be flabbergasted at how much money is saved and your bank account will look healthier.
Tips to ensure a speedy auto refinance loan approval
Pay special attention to important points described below so as to get the best deal
Auto refinance loan applications need to be in the same names (with exact spelling) as the names on the present car loan. This is important because that is how the present car loan is identified and found. Have the car loan account number ready. If the name is given with a different spelling the current loan cannot be found and the refinance gets rejected.
You must refinance more than 75% 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 the auto refinance company can price out the car to make sure it meets Loan to Value guidelines. Enter the year and model and enter the 17 digit Vehicle Identification Number found on your 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.
Will the Same Company Refinance the Car Loan?
No the same lender will no refinance the car loan to a lower rate APR. While auto refinancing a different lender than your current car financer will be needed.
The Other Side of Refinancing
Refinancing an auto loan makes sense if it will lower the interest rate or need to extend the loan term to more easily afford the monthly payments. A longer loan term typically means that the lender is taking on more risk, so the interest rate is higher. If refinancing is for a longer loan term then it means that the interest rate is not lower than the previous one.
That six-year loan taken out a year ago is now a five-year loan, so there's no need to shorten the maturity of the current loan. Time has done that!.
Depending on the depreciated value of the car and the initial down payment on the vehicle, there may be upside-down in the loan, meaning the loan balance is greater than the value of the car. Auto loans are secured loans backed by the value of the car. When the car is worth less than the loan, the lender is taking on additional risk and will have to be compensated for that risk with a higher interest rate on the loan.
The Sunny side of it is to stay with the current loan and visualize using the savings from not having to pay loan application fees and title changes to pay for gasoline.
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