Requirements to refinance your car loan Advertiser Disclosure Advertiser Disclosure We are an independent, advertising-supported comparison service. Our mission is to help you make smarter financial decisions by offering interactive tools and financial calculators that provide objective and original content, by enabling you to conduct your own research and compare information for free to help you make informed financial decisions. Bankrate has agreements with issuers, including but not limited to American Express, Bank of America, Capital One, Chase, Citi and Discover. How We Make Money The deals that are displayed on this site are from companies who pay us. This compensation may impact how and where products appear on this site, including for instance, the order in which they be listed within the categories of listing and other categories, unless prohibited by law. Our mortgage, home equity and other home loan products. But this compensation does not influence the content we publish or the reviews that you see on this site. We do not contain the universe of companies or financial deals that could be open to you. MoMo Productions/Getty Images
5 minutes read. Released November 16, 2022
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Written by Bankrate Written by This article was generated using automation technology and thoroughly checked and edited by an editor on our editorial team. Edited by Rhys Subitch Edited by Auto loans editor Rhys has been writing and editing for Bankrate since late 2021. They are passionate about helping readers gain the confidence to manage their finances through providing clear, well-researched information that breaks down otherwise complex topics into manageable bites. Written by Mark Kantrowtiz and reviewed by Nationally acknowledged student financial aid expert Mark Kantrowitz is an expert on student financial aid including the FAFSA as well as 529 plans, scholarships education tax benefits and student loans. The Bankrate promise
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They ensure that what we write will ensure that our content is reliable, honest and reliable. The loans journalists and editors focus on the things that consumers care about the most -- various kinds of loans available, the best rates, the most reliable lenders, ways to repay debt, and many more. This means you'll be able to feel secure when making a decision about your investment. Integrity of the editing
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We are compensated in exchange for the promotion of sponsored goods or services, or by you clicking on specific links that are posted on our website. Therefore, this compensation may affect the way, location and when products appear within listing categories and categories, unless it is prohibited by law. We also offer mortgage or home equity products, as well as other home loan products. Other factors, like our own website rules and whether the product is available within your area or at your personal credit score can also impact how and where products appear on this website. Although we try to offer the most diverse selection of products, Bankrate does not include information about every financial or credit product or service. If you're considering refinancing your vehicle loan is often based on the amount of savings you'll get -- either in a month-to-month or overall. Before you sign off on the new loan it is essential to confirm that your car and you fit the requirements. Though requirements vary among lenders, you should keep in mind the ones below. The requirements for taking out an loan in order to finance your vehicle Be aware of these factors when considering an auto loan. The remaining time on the loan The length of time left on the loan is a standard qualification requirement. Typically, lenders require you to be current on your loan payments, have paid at least six months of your loan and have at least six months remaining. This lets the lender to see that you have a track record of payments -- or have enough funds to profit off interest when you finish repaying. If you've taken out a 60-month auto loan and are three months into making payments it is likely that you won't be able to refinance it for a few more months. Similarly, if you've made 54 payments already and are in the process of paying them off, you'll likely need to pay the loan off, rather than refinancing it. The remaining amount loan amounts differ by lender and lender, but you can anticipate that you will need between the amount of $3,000-$5,000 left in your loan. Because refinancing is basically taking out a new and expensive loan, lenders aren't willing to provide small amounts as they'll be unable to earn as much from these. If you purchased an expensive vehicle it is possible that you won't be able to refinance it immediately. Finding auto refinance loans for over $50,000 can be a challenge. Model year and mileage If you purchased a used vehicle and are looking to refinance your loan -- or you've recently accumulated a significant amount of miles, it's possible that you won't be able to. The majority of lenders have a cap of 100,000-150,000 miles. Although lenders do not set the minimum age but you might not qualify even if you own an older vehicle. Most lenders have an age limit of 10 years old. However, some lenders may require a vehicle less than eight years old to be able to refinance the loan. Credit score As with any loan you will be an important factor. Refinancing is generally a good option if you've got low interest rates on your auto loan and have since raised your score on credit. Anything below 600 will not bring you a lower rate and could , especially when you extend the loan duration to lower your monthly payments. It's free to apply online. If your debt isn't where you would like it to be, think about working on it prior to making an application to refinance. Debt-to-income ratio requirements Your debt-to-income ratio measures your debt against your income, and is usually expressed in terms of a percentage. The acceptable range is different from lender to lender but is typically less than 50 percent. The process of paying down credit card debts is the most effective way to reduce your DTI should the lender deems it too high. Reducing your other installment loans or credit card charges could help show that you are financially responsible to a prospective lender. Consider using a to find your DTI. That way, you'll know the amount of debt you'll have to settle before applying. How do you refinance the car loan Refinancing a vehicle loan is relatively simple. It involves the same as getting a new car loan. These steps will help you streamline the process: Shop around for the best loan. Make an application with at least three lenders, as you would for taking out an auto loan. You must apply for the loan. Be sure to fill in all required information -regarding your identity, employment, current loan and vehicle -- and provide the necessary documentation. Receive your loan funds. The lender will send you the funds or pay your current lender directly. It could take anywhere from between a couple of days and a few weeks, so keep on making payments. You can begin paying off your loan. Once your loan is funded and you have it, it's time to begin paying off the loan. Be punctual with your payments and make sure you send them to the correct lender. Find out the best way to use your savings. After you've paid off the new loan then you are able to use the money to improve your finances. Think about putting your savings towards , debt repayment or . The pros and cons of refinancing your car loan Before refinancing, weigh the . Pros You may secure a lower interest rate. It is possible that the lender refinancing your loan could provide you with a lower rate , saving money over the life of your loan. A lower interest rate is more likely if your credit score has improved or if you borrowed through a dealership. Your monthly installment could be reduced. The extension of your term or the reduction of your interest rate may lower your monthly payments. Be careful, though. Extending the auto loan time frame will also result in additional interest. Cons Your interest rate may rise. If you're not eligible for a lower rate you should think about upgrading your credit rating before applying. You can extend the term of your loan -- and the interest you pay. Even if your interest rate may be less, you could nonetheless increase the amount the interest you have to pay if you decide to extend the loan term. The longer it takes to pay off your car and the higher interest rate you'll accumulate. You may end up upside-down in your loan. When you prolong the loan term when refinancing, the amount you have to pay could exceed the vehicle's value as a result of depreciation. This is referred to as being upside down when you loan and can make it challenging to refinance or sell your car without taking a loss. What to consider when refinancing your auto loan There are some crucial questions to be asked prior to deciding whether or not to refinance your auto loan. Are your current interest rates competitive? If you're paying a reasonable interest rate, then you'll want to compare current rates to ensure that the new loan is worth the cost. The Federal Reserve increased the multiple sessions in a row, which may mean auto loan rates are likely to increase in the next year. Bankrate tip
It is important to compare rates from several lenders to see which offers you the most value. Use a to compare your monthly payments as well as the total interest rate with you current loan.
What's your car worth? If you are considering refinancing your vehicle loan it is important to know your loan-to-value ratio. This ratio compares to how much you are owed. If you're close to paying more for your car than it's worth, you may want to refinance your loan to an earlier term. What are the terms for the loan? It is important to know the fundamental specifics of your current loan in the event of refinancing. These include the loan' APR, length, duration, time left, and the monthly payment. It is also possible to check the loan documents to find out more about late charges and . Future steps Refinancing your vehicle loan is a smart financial move, but you should take a few steps to prepare to go through the procedure. Consider your current credit score, your car's age and mileage and the amount of debt you have on your vehicle and your ability to make the payments for the new loan. Depending on your financial situation you might want to consider asking ways to make your car loan payment more affordable. Find out more
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Written by This article was produced using automated technology, and was thoroughly checked for accuracy and quality by an editor from our editorial team. The article was edited by Rhys Subitch Edited by Auto loans editor Rhys has been writing and editing for Bankrate since late 2021. They are committed to helping readers gain the confidence to manage their finances through providing clear, well-researched facts that break down complicated topics into digestible pieces.
Auto loans editor
Reviewed by Mark K. Kantrowitz Reviewed by Nationally acknowledged student financial aid expert Mark Kantrowitz is an expert on student financial aid, the FAFSA as well as 529 plans, scholarships, education tax benefits as well as student loans.
Nationally acknowledged expert in student financial aid
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