General Auto Refinace Faqs
Why refinance my car loan?
There are many motivations to refinance your auto loan. Your current loan might have a higher rate than you like, or a lot of extra costs you didn’t know you agreed to. Maybe your credit score has improved and you’ll qualify for a lower rate, or interest rates in general might be lower than what they were when you closed on your loan. Whatever your reason might be, refinancing often means you can lower your monthly payments.
How much can I save?
This all depends on various factors, including whether you qualify for a lower interest rate than you currently have, whether you have extra charges on your current loan that you wish to do away with, whether interest rates have risen or dropped since you got your loan.
When does refinancing make the most sense?
Here are a few guidelines for that:
- You still have several years on your current loan.
- You don’t owe more than the car is worth.
- Your car is less than seven years old and/or has under 75,000 miles.
What do I need to provide to the lender?
To keep things running smoothly, make sure you provide this information.
- Your current lienholder information found in monthly loan statements, purchase paperwork, or loan coupon book
- Proof of insurance
When A Refinance Auto Loan Might Not Make Sense
Refinancing your auto loan doesnt always put you in a better position, though. Here are some situations in which refinancing may not be a good idea:
- You owe more on the car than its worth: Owing more on your car than its worth is known as being upside down in the financial world. Upside down loans if theyre available at all typically come with higher interest rates. While you might get lower monthly payments, youll often pay far more over the lifetime of the loan.
- Your current loan has prepayment penalties:To make up for what theyll lose in interest payments, some lenders charge a fee for paying your loan off early. If your loan comes with prepayment fees, the cost of paying it off early with a new loan could negate any savings youd get from a lower interest rate.
Whats The Difference Between A Cash
A cash-out refinance is pretty similar to a normal refinance. However, with the former, you borrow against the positive equity you have in your car. So, upon closing, you receive a lump sum in addition to a new loan.
Lets pretend you have a used car worth $20,000 and your loan balance is $10,000. You could apply for a $15,000 loan, which would equate to $5,000 of upfront cash.
Keep in mind though, you not only have to repay this amount but the additional debt still accrues interest. So, your total loan interest is higher.
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When Is Auto Loan Refinancing A Good Idea
Your financial situation may have changed since you first took out your original car loan. Refinancing could give you access to lower interest rates or a longer term for your loan. Both of these options can lower your monthly loan payment.
It’s also possible that when you didn’t have access to the best interest rates. Perhaps your credit score has improved, and you’re eligible for lower rates. Or maybe you previously financed your loan through a dealer who didn’t give you the most competitive offer.
Whatever your situation, refinancing your auto loan could help you tailor your loan payments to fit your current budget.
Our Top Picks For Best Auto Refinance Companies
- RateGenius – Runner-up for Best Marketplace
- OpenRoad – Best for Low Credit Score
- AutoPay – Runner-up for Best for Low Credit Score
- Caribou – Best for Fair Credit
- myAutoloan – Runner-up for Best for Fair Credit
- Lightstream – Best for Any Kind of Vehicle
- Digital Federal Credit Union – Best for Newcomers to Credit Building
Why we chose it: We chose LendingTree as best auto refinance marketplace because, among its approximately 40 lenders, some will consider borrowers with credit scores in the low 500s.
- Quote request form takes less than five minutes
- Serves a wide range of credit scores
- Minimum loan balance for refinancing is $8,000
- No 24-month loans terms start at 36 months
- No set loan amount range this varies by lender
- Loan Terms
- 36 to 72 months
LendingTree is a marketplace of about 40 lenders where you can compare rates for a wide variety of financial products, including auto refinance loans.
The companys marketplace covers the full spectrum of credit scores. This means that subprime borrowers people with scores between 580 and 619, also referred to as poor credit have a chance at refinancing their auto loan through LendingTrees network.
We particularly liked LendingTrees Auto Refinance Rates comparison tool, which allows you to input your zip code, loan amount and estimated credit score, and then get examples of potential auto refinance options with terms from 36 to 72 months .
- No limit on existing loan balance
- Prequalify with a soft credit inquiry
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What Is The Difference Between Refinancing A Car And Leasing A Car
The biggest difference between financing and leasing a vehicle is ownership.
With a loan, you work with a lender to purchase a car. Assuming you make a down payment, both you and the lender immediately have an ownership stake in the car. As you make payments, you build equity in your vehicle. Upon full repayment, you become the vehicles sole owner.
On the other hand, leasing a car is like renting an apartment. Its yours for the duration of your agreement with the lessor, so long as you make timely payments. Once your lease expires, you hand over the keys and its no longer your car.
When Should I Refinance My Car Loan
Here are some instances in which it makes sense to refinance a car loan:
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Pentagon Federal Credit Union
At PenFed, youll find some of the best new car loan rates available on all types of auto loans: new, used and refinancing. You can apply for a loan without being a member, but you will have to join to receive the loan. You can apply for membership and a loan online. As the name implies, PenFed was originally created to serve Department of Defense employees, but it has recently opened its membership to anyone. All you need is a valid Social Security number or taxpayer identification number . Youll need to make a $5 minimum deposit, as all members must own a share in the credit union to use its services.
Best Credit Unions For Car Loans Of 2022
- Best for Green Vehicles: Suncoast Credit Union
PenFed offers competitive rates and robust financing tools and features, and it is easy to join.
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Calculators and rate comparison tools
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Website is a bit overwhelming
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Must be a member to access products
Also known as PenFed, Pentagon Federal Credit Union serves people in all 50 states, Puerto Rico, Washington D.C., Guam, and Okinawa, Japan. However, most of its branches are concentrated in the greater Washington D.C. area. The rest of its customers are served digitally, and services include banking products and services, credit cards, car loans, mortgages, and home equity loans.
PenFed was created to serve military members, veterans, and federal employees, but it is now open to anyone. You can join by simply opening a savings account for $5.
You can finance a new or used car or refinance a current auto loan with PenFed. The union also has a car buying service that helps you search for cars from a trusted network and offers discounted rates if you use the service. Discounted rates start at 4.44% for new cars for terms of 36 months. Used cars with terms of 36 months start at 5.64% through PenFeds partnership with TrueCar.
PenFed also offers a lot of educational resources and step-by-step guides for first-time car and home buyers, financial calculators, mortgage knowledge, an advice center, and a financial hardship center.
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What Is Required To Refinance A Car Loan
Every lender determines eligibility differently, but there are some documents and information they typically require to refinance your auto loan.
- Personal information: Youll need to prove you are who you say you are, so be prepared with a copy of your drivers license or proof of residence, phone number and Social Security or another identity number. Lenders want to know that youll be able to repay your loan, so theyll ask about your income, current debt and your employers information. They might also ask for a paycheck stub, a tax return or your employment history.
- Vehicle information: The lender will need to make an accurate valuation on the vehicle under consideration for financing, so theyll want to know the VIN, make, model, mileage, year and registration number. You might also be asked to provide evidence of active auto insurance.
- Current loan information: Be prepared to provide the name of your current auto lender, loan number, current balance, monthly payment and payoff amount. Typically, lenders like to see an on-time payment history of at least two years before theyre willing to approve you for refinancing. But check with your lender since it can vary.
Auto Refinance In Todays Economy
Its not surprising that people are struggling with finances. Recent Census Bureau shows that about 40% of adults are experiencing difficulty keeping up with basic household expenses.
One avenue for potential savings? Auto loan refinance. Many auto refinance companies currently tout a monthly payment drop of about $100, and a few others claim their average customer saves closer to $150.
Monthly new car payments have been affected as well: about 13% pay more than $1,000 per month, almost twice as many people as last year.
Used car prices have gone up too, sometimes surpassing the cost of a newer version of the same make and model.
However, auto refinance remains a viable option. A lot of companies will even work with borrowers with car loans originated as recently as one month ago.
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Finding The Best New Car Auto Loan Rates For Near
Even though your options might be limited you can still get an auto loan with a With credit score of 660 to 669, you will have plenty of options. You wont get the very best interest rates or promotions, but youll have no problem getting offers. Youll still have to review those offers and select the best one for your needs.
The easiest way to get offers from multiple lenders is to use an auto loan matching service. These services can usually get you multiple offers in a matter of minutes.
Our #1 Auto Loan Matching Service
Helping people with any-credit auto financing since 1999!Over 1000 dealerships nationwide.
What Should You Consider When Choosing An Auto Loan
In a recent interview with Kathryn J. Morrison, consumer affairs expert and instructor at South Dakota State University, she said “When shopping for an auto loan, one needs to consider more than just the interest rate. Are there any additional fees that you will be charged? Do you need to have a down payment to qualify for this rate? What is the total loan amount, and how much interest will you be paying over the life of the loan?”
There’s a lot to take into account when choosing an auto loan. Your credit score, for example, has a major impact on the rates you get. The best rates typically go to those with excellent credit. At the end of Q2 2021, the average credit score was 732 for a new-car loan and 665 for a used car loan, according to a report from Experian.
In Q2 2021, borrowers who received the lowest rates had a score of 781 or higher. Those borrowers, also known as super-prime borrowers, received an average APR of 2.34% for new cars and 3.66% for used cars. Prime borrowers with a credit score between 661 and 780 received an average APR of 3.48% for new loans and 5.41% for used loans, while nonprime borrowers with credit scores between 601 and 660 received an average APR of 6.61% for new car loans and 10.49% for used.
It’s also important to consider what term fits your financial situation. Longer terms generally have lower payments but cost more over the life of the loan.
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Best Credit Union For Auto Refinance: Penfed Credit Union
PenFed Credit Union
- Minimum credit score: Not stated
- Loan terms : 36 to 84 months
PenFed Credit Union is our top choice for auto loan refinancing from a credit union. The lender features widespread availability and competitive rates.
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Offers a wide range of options
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Competitive rates
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Loan amounts from $500 to $150,000
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Online application
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Borrow up to 125% of the vehicle’s value
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High minimum loan amount for longer terms
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Excellent credit history required for lowest rates
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Membership in the credit union is required
Members of PenFed get access to very competitive refinance rates with an average monthly savings of $108 per month. There’s a convenient online application for refinances, and borrowers can finance up to 125% of their vehicle.
Next Steps Next Steps
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What Do I Need To Refinance My Car Your In
Want to upgrade your auto loan? Heres what you need to refinance.
Your personal finances arent static, theyre fluid. Maybe your credit scores increased or you recently received a raise at work. Either way, you may have enhanced your credibility in the eyes of lenders and increased your chances of qualifying for a refinance.
Auto loan refinancing is the process of replacing your existing loan with a new one. So, if youre in the market for a loan upgrade, youre likely wondering, What do I need to refinance my car?
Dont worry, weve got you covered. Before we discuss what you need to refinance your car, lets quickly overview the benefits of refinancing.
2022 Auto Refinance Rates
How To Refinance A Car
To refinance an auto loan, gather all the necessary documents. Then, evaluate your credit profile and your car’s information to determine if refinancing is beneficial and if you qualify. Lenders will post their requirements online and some even allow you to file for pre-qualification.
Before starting the application process, shop around and compare offers from different auto refinance lenders. When you settle on the best one, submit a formal application and wait for the lender’s formal offer. If accepted, you can finalize the document, settle the previous loan, and start your loan payments with the new lender.
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How Do You Get A Car Loan
Some consumers can pay cash for a new vehicle, but most use financing from a bank, credit union, nonbank auto lender, or dealer. Here are steps you can take in order to get a car loan: