Common car refinancing mistakes to avoid Advertiser Disclosure Advertiser Disclosure We are an independent, advertising-supported comparison service. Our mission is to help you make better financial decisions by providing you with interactive financial calculators and tools that provide objective and unique content, by enabling you to conduct your own research and compare data for free - so that you can make informed financial decisions. Bankrate has partnerships with issuers, including but not restricted to, American Express, Bank of America, Capital One, Chase, Citi and Discover. How We Earn Profit The offers that appear on this site are from companies who pay us. This compensation could affect how and when products are featured on the site, such as, for example, the order in which they may appear in the listing categories and other categories, unless prohibited by law. Our mortgage, home equity and other home loan products. However, this compensation will have no impact on the content we publish or the reviews that you read on this site. We do not contain the universe of companies or financial offerings that could be available 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 ways and pitfalls of taking out loans to purchase an automobile. Written by Rhys Subitch Edited by Auto loans editor Rhys has been editing and writing for Bankrate since late 2021. They are committed to helping readers gain confidence to manage their finances with clear, well-researched facts that break down complicated subjects into digestible pieces. The Bankrate promise
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You can find refinancing guidelines on the lender's websites or Bankrate's .
2. Don't contact your current lender first While your current lender might not have the lowest interest rates, it is still the best place to start. Before you look into refinancing options that aren't offered by the current lender it is advisable to contact them and tell them about your situation and see if they could assist. Certain lenders provide this service , that alters the conditions, the payment due date or interest rate to provide borrowers with financial relief. Bankrate tip
Even if you don't follow through with refinancing the loan It is possible that they can offer you a better deal than the new lender might.
3. Extending the loan term too much Refinancing aims to cut costs, but when you extend your loan too much and you are spending more money over the loan's lifetime. While a will mean the payment will be lower, you will also pay more interest. Bankrate tip
Before adjusting your term, take advantage of an auto refinance to make sure you are saving cash.
4. Not considering your credit As with most cases regarding finance, credit score serves as the primary factor in approval. Therefore, you must improve your credit and prior to refinancing your loan. You're more likely to get the loan you want and get more money in the end. loan overall. A credit score of 670 or higher typically qualifies borrowers for the most favorable interest rates. Tips from Bankrate
Check your credit ahead of loan applications by using AnnualCreditReport.com.
5. Shopping with just one lender Similar to in the process of obtaining your first auto loan, we recommend comparing at least three lenders. So, while signing off on the first loan offer may be tempting, not all options are created equally. The lower the interest rate, the lower your car payment. You need to ensure that you're getting the best deal that is available. Tip for banks
Compare the current rates that are offered by a variety of lenders. Pay close attention to the conditions for approval, the repayment options and how they compare to your current loan.
6. Being upside down on your loan Before refinancing, check what equity in your car is with an . Equity is the amount by which the vehicle's value exceeds the amount you owe for the loan. If you are owed more than what your car is worth, or hold negative equity, refinancing is likely not the best choice. Bankrate tip
Do not refinance a car you can't afford. Check where your may be overextending and calculate expected costs prior to signing the new loan.
7. Giving up after your first rejection Auto loan refinancing guidelines differ between lender to lender So the fact that you've been rejected by one doesn't mean that you'll be rejected by all. If you're asking, "Why can't I refinance my car?" you have the right to ask your lender under the (ECOA). They have to explain why the application was rejected. Bankrate tip
Knowing the reason you were rejected will improve your chances of getting approval for the next time. For example, if you have a credit score that is too low it is possible to work on improving it prior to applying again.
The bottom line While refinancing your car loan could be risky, it is a great method to cut down on your monthly cost and continue paying for your car. Keep these common mistakes in mind, and keep up-to-date on the latest trends to ensure you walk away with the best loan for your needs.
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This article is written by Auto Loans Reporter Rebecca Betterton is the auto loans reporter for Bankrate. She has a specialization in helping readers in navigating the ways and pitfalls of borrowing money to purchase a car. Written by Rhys Subitch Edited by Auto loans editor Rhys has been writing and editing for Bankrate since the end of 2021. They are committed to helping readers gain the confidence to manage their finances with clear, well-researched details that cut complex subjects into bite-sized pieces.
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