Common car refinancing mistakes to avoid Advertiser Disclosure Advertiser Disclosure We are an independent, advertising-supported comparison service. Our aim is to assist you make smarter financial decisions by providing you with interactive financial calculators and tools as well as publishing reliable and original content. This allows you to conduct your own research and compare information for free – so that you can make sound financial decisions. Bankrate has agreements with issuers, including but not restricted to, American Express, Bank of America, Capital One, Chase, Citi and Discover. How We Earn Money The offers that appear on this website are provided by companies who pay us. This compensation may impact how and when products are featured on the site, such as, for example, the order in which they be listed within the categories of listing, except where prohibited by law. Our loan products, such as mortgages and home equity, or other home lending products. This compensation, however, does affect the information we provide, or the reviews that you see on this site. We do not contain the entire universe of businesses or financial offers that may be accessible to you. Tom Werner/Getty Images
3 min read . Published 24 February 2023
Authored by Rebecca Betterton Written by Auto Loans Reporter Rebecca Betterton is the auto loans reporter for Bankrate. She specializes in assisting readers with the details of borrowing money to purchase cars. Edited by Rhys Subitch Edited by Auto loans editor Rhys has been editing and writing for Bankrate since the end of 2021. They are committed to helping readers gain the confidence to manage their finances with concise, well-researched and informative information that breaks down complicated subjects into digestible pieces. The Bankrate promise
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You have money questions. Bankrate has the answers. Our experts have been helping you manage your finances for more than four decades. We are constantly striving to give consumers the professional advice and tools needed to be successful throughout their financial journey. Bankrate adheres to a strict code of conduct policy, which means you can be confident that our content is truthful and reliable. Our award-winning editors, reporters and editors produce honest and reliable content to help you make the best financial decisions. Our content produced by our editorial staff is objective, factual, and not influenced from our advertising. We’re transparent about how we are able to bring quality content, competitive rates, and useful tools for our customers by describing how we earn our money. Bankrate.com is an independent, advertising-supported publisher and comparison service. We receive compensation for the placement of sponsored products andservices or by you clicking on certain links posted on our website. Therefore, this compensation may impact how, where and when products appear within listing categories, except where prohibited by law. This is the case for our mortgage home equity, mortgage and other home loan products. Other factors, such as our own website rules and whether the product is available in your region or within your self-selected credit score range could also affect the way and place products are listed on this website. While we strive to provide the most diverse selection of products, Bankrate does not include details about every financial or credit item or product. If you are having trouble making your current loan payments, swapping your current auto loan with a new one can be the best way to save money and continue to drive your vehicle. But there are some common mistakes to avoid so that you don’t get into another financial bind. Seven mistakes to avoid when refinancing your vehicle. Avoid these common pitfalls when refinancing your car loan. 1. Not checking refinancing requirements Lenders have specific requirements when it comes to refinancing. Check for the criteria pertaining to your vehicle’s age, mileage and the remaining balance in the loan. For example, lenders often require a minimum of six months’ worth of payments for the loan and a remaining balance between $3,000 to $5,000 to refinance. A tip from the Bankrate
You can find refinancing requirements from lender’s websites or Bankrate’s .
2. Not checking with your current lender first While your current lender might not have the lowest interest rates, it’s the best place to begin. Before exploring refinancing options outside your current lender, it is wise to contact them and discuss your situation with them to determine if they are able to assist. Certain lenders provide this service , which alters the terms, the due date for payments or interest rate , to provide borrowers with financial relief. Tips from Bankrate
If you do go through with refinancing the loan, it is possible that they will offer a better deal than an existing lender might.
3. Intending the loan term too much Refinancing aims to cut costs, but when you extend the term of your loan to a large extent it could cost you more over the loan’s lifetime. While a will mean lower monthly payments, you will also pay more interest. Tips from Bankrate
Before adjusting your term, take advantage of auto refinances to confirm you will save money.
4. Don’t take into account your credit score As with most cases regarding loans, the credit score is used as the primary factor in approval. Thus, improve it prior to refinancing your loan. You’ll be more likely to receive the available and leave with more money in the end. loan overall. A credit score of 670 or greater typically qualifies borrowers for the most favorable interest rates. Tip from Bankrate
Check your credit ahead of loan applications by using AnnualCreditReport.com.
5. Just shopping with only one lender As you would in the process of obtaining your first auto loan, we recommend comparing at least three different lenders. Therefore, even though signing on the first loan offer may be tempting, not all options are created equally. In the end, the lower your interest rate the less you’ll pay for your car loan. You want to ensure you’re getting the best deal that is available. Tips for Bankrate
Compare current rates offered by a range of lenders. Pay close attention to the eligibility requirements, repayment options and how they compare to the current loan.
6. Being upside down on your loan Before refinancing, check what equity in your vehicle is by comparing it to an . Equity is the amount by which the value of your vehicle is greater than the amount you have to pay to the car loan. If you have debt that is greater than what your car is worth or you have equity that is negative refinancing your loan is probably not the best option. The bankrate advice
Don’t refinance a vehicle you aren’t able to afford. Examine the areas where you might be overextending and estimate the costs before signing off on an additional loan.
7. Refusing to accept your initial rejection loan refinancing requirements vary between lender to lender Therefore, just because you were rejected by one doesn’t necessarily mean that you’ll be rejected at all. If you’re asking, “Why can’t I refinance my vehicle?” you have the right to question for the lender in accordance with the (ECOA). They have to explain why the application was rejected. Bankrate tip
Knowing the reason you were rejected can help you improve your chances of getting approval later on. If, for instance, your credit score is too low it is possible to work on improving it prior to applying again.
The bottom line is that refinancing your car loan could be risky It is an excellent option to reduce the monthly costs and to continue paying for your car. Keep these common mistakes in mind, and keep up to date on current for you to be sure you leave with the best loan for your requirements.
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Written by Auto Loans Reporter Rebecca Betterton is the auto loans reporter for Bankrate. She is a specialist in helping readers to navigate the details of borrowing money to buy an automobile. Edited by Rhys Subitch Edited by Auto loans editor Rhys has been writing and editing for Bankrate since the end of 2021. They are passionate about helping readers gain confidence to control their finances by providing precise, well-researched and well-informed details that cut complex topics into manageable bites.
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