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 better financial decisions by offering interactive tools and financial calculators that provide objective and unique content. We also allow you to conduct your own research and compare data for free to help you make informed financial decisions. Bankrate has agreements with issuers such as, but not limited to American Express, Bank of America, Capital One, Chase, Citi and Discover. How We Make Money The products that appear on this site are from companies that compensate us. This compensation may impact how and when products are featured on this website, for example for instance, the order in which they appear within the listing categories, except where prohibited by law. This applies to our mortgage, home equity and other home loan products. But this compensation does affect the information we publish, or the reviews you read on this site. We do not contain the vast array of companies or financial offers that may be available to you. Tom Werner/Getty Images
3 minutes read. Published February 24, 2023
Written by Rebecca Betterton 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 a car. Written 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 take control of their finances through providing concise, well-researched and informative facts that break down complicated topics into bite-sized pieces. The Bankrate guarantee
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There are money-related questions. Bankrate has answers. Our experts have been helping you manage your finances for more than four years. We are constantly striving to give our customers the right guidance and the tools necessary to make it through life’s financial journey. Bankrate adheres to strict standards policy, which means you can be confident that our content is truthful and precise. Our award-winning editors, reporters and editors produce honest and reliable information to assist you in making the best financial decisions. The content we create by our editorial team is factual, objective and is not influenced from our advertising. We’re honest regarding how we’re able to bring quality content, competitive rates, and helpful tools to our customers by describing how we earn our money. Bankrate.com is an independent, advertising-supported publisher and comparison service. We are compensated in exchange for the placement of sponsored products and, services, or when you click on certain links posted on our website. Therefore, this compensation may impact how, where and in what order products are listed, except where prohibited by law. We also offer mortgage home equity, mortgage and other home loan products. Other elements, such as our own proprietary website rules and whether or not a product is available within the area you reside in or is within your self-selected credit score range can also impact how and where products appear on this website. While we strive to provide the most diverse selection of products, Bankrate does not include information about every financial or credit product or service. If you’re having difficulty making your current loan payment, replacing your auto loan by a fresh one can be an excellent way to save money and remain behind the wheel of your vehicle. However, there are some typical mistakes to avoid in order to ensure you don’t end up in yet another precarious financial spot. Seven mistakes to avoid when refinancing your vehicle. Avoid these common traps when refinancing your car loan. 1. Do not check refinancing requirements. Lenders are strict regarding refinancing. Check for requirements pertaining to the car’s age, miles and even the remaining balance in the loan. For instance, lenders usually will require a minimum of six months of repayment on your loan and a balance between $3,000 to $5,000 to refinance. Bankrate tip
You can find refinancing requirements from lenders’ websites or Bankrate’s .
2. Not checking with your current lender initially. Although your current lender might not offer the most competitive rates, it is still the best place to begin. Before you look into refinancing options that aren’t offered by your current lender, it is wise to reach out and tell them about your situation to see if they can help. Certain lenders provide this service , which alters the terms, payment due date or the interest rate to provide borrowers with financial relief. Tip from Bankrate
Even if you don’t follow through with refinancing the loan It is possible that they’ll offer more than a new lender might.
3. Intending the loan term too much Refinancing aims to reduce costs, however when you extend your loan excessively, you could spend more money over the loan’s duration. While it could mean lower monthly payments however, you’ll also have to pay more interest. Bankrate tip
Before adjusting your term, take advantage of auto refinances to make sure you are saving cash.
4. Not considering your credit Like most situations with loans, the credit score score serves as the primary factor in approval. Therefore, you must improve your credit and prior to changing your loan. You’re more likely to get the loan you want and get more money in the end. loan overall. If your credit score is 670 or greater generally qualifies borrowers to the best interest rates. Tip 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 that you compare at least three different lenders. While deciding on the first loan offer might sound tempting, not all options are all created to be equal. Ultimately, the lower your interest rate the lower the cost of your car. You need to ensure that you’re getting the best deal out there. Tip for banks
Compare the rates currently provided by a variety of lenders. Pay close attention to the conditions for approval, the repayment options, and how it stacks up against your current loan.
6. Being upside down on your loan Before refinancing, make sure you know whether the equity on your vehicle is by comparing it to the help of . Equity is the sum by which the value of your vehicle is greater than the amount that you owe on the auto loan. If you are owed more than your car is worth, or hold negative equity refinancing your loan is probably not the best option. Tips from Bankrate
Do not refinance a car you’re not able to pay for. Examine the areas where you might be in excess and calculate the expected expenses prior to signing the new loan.
7. Giving up after your initial rejection loan refinancing requirements differ between lender to lender Therefore, even if you’ve been rejected by one doesn’t mean you’ll be rejected by all. If you’re wondering, “Why can’t I refinance my vehicle?” you have the right to inquire with the lender in accordance with the (ECOA). They must explain to you the reason your application was not approved. Bankrate tip
Understanding why you were denied will improve your chances of getting approval in the future. If, for instance, you have a credit score that is too low it is possible to work on improving it before applying again.
The bottom line While refinancing your car loan could be risky, it is a great way to lower your monthly cost and continue financing your vehicle. Make sure to keep these mistakes in mind and stay up-to-date with current information for you to be sure you leave with the right loan to meet your needs.
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The article was 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 borrowing money to purchase cars. 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 control their finances by providing clear, well-researched information that breaks down otherwise complicated topics into digestible pieces.
Auto loans editor
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