Looking for a lower car payment? And want to refinance your auto loan? Discover 5 important tips for refinancing your car loan now. As you pay off your car loan, interest rates and market values can change. This means you could be paying more than you need to. By refinancing, you could see a significant reduction in your repayment costs. But with so many options out there, it’s hard to know how to get the best deal to suit you and save money.

Don’t worry! Read on for 5 important tips for refinancing your auto loan for a lower car payment.

1. Know When’s the Time to Refinance and When it’s Not

Saving money from refinancing is tempting. Especially if you want to channel some of those savings into other life events like saving for a home.

But before you spend the time looking into the process more, consider if it’s the right time to refinance. Individual finances vary so much, it’s important to make sure the time is right for you.

It might be a good time if interest rates have gone down or your credit score has gotten better. If your current loan is still from a dealership, it also might be a good idea to refinance. Dealerships often offer higher interest rates than other lenders.

If your credit score has decreased, interest rates and market-rate have increased, it might not be a good time. Also, if you’ve damaged your vehicle this could go against you too.

2. Consider Other Options Than the Big Banks

It’s well known that the big banks are looking to profit off any loans they enter into. Helping those who come to them isn’t always a top priority. So, don’t limit yourself to the big banks as they won’t always give you the best rates.

Consider checking out your local credit unions or smaller banks. These are usually more community-minded. They tend not to be profit-driven, focusing more on the goal of providing a service and helping the client. It’s also worth checking online loan providers too.

3. It’s Okay If You Get Declined

If this happens, don’t panic. Try to work out why the lender declined your application. By working this out, you will be in a position to remedy what went wrong. Was it because you had a high balance on a credit card that was bringing down your credit score?

If so, try to get some of this paid off to boost your score before applying again. It’s not impossible to refinance car bad credit, but it can be more difficult so be aware.

It might have been because you were applying for a high-mileage car or one that was over 10 years old. These are factors that can reduce approval chances. Every lender is different though, so check their requirements before applying. Even if you got declined for an auto loan by one lender, it doesn’t mean you couldn’t get approved by another.

4. Shop Around

All loan application processes will include checking into your credit report. But not all credit checks will do the same thing. If a lender requires a ‘hard inquiry’, this can have an impact on your credit score. But a ‘soft inquiry’ usually won’t.

This can be worrying, but don’t let it be. You shouldn’t let the chance of a few ‘hard inquiries’ put you off shopping around. It isn’t a goal of credit agencies to penalize you for trying to get the best rates.

When shopping around, do so within a short time frame. Before, models assumed each inquiry was a unique application. This implied you were looking for many different loans which could be problematic on your credit score.

Most credit scoring models now are able to detect when you’re shopping for the best rates. Now, many matching inquiries in a certain short time frame count only as one inquiry. So your credit score is only hit once.

5. Don’t Be Complacent

Once you find the right rate and deal for you, and you’re nearing the end don’t get complacent. You still want to keep an eye on the details.

It might be tedious but always check the fine print on your current and new loan. You don’t want to get caught out on penalty prepayment fees for switching or any new fees for signing up with a new deal.

Sudden unexpected charges could wipe out any of those savings you thought you’d be making. It could be the difference between a bad deal and a great one.

At this stage, it’s worth taking your time and reading everything through. Make sure that everything you thought you were agreeing to is in the contract. Also, make sure there isn’t anything in there that you didn’t agree to.

Also, it’s important you don’t assume that it’s all completed. Your existing loan isn’t paid off until you’ve received confirmation. So don’t be too quick to cancel any payments.

Any delay in the process could mean you end up ‘missing’ a payment. This will have a negative impact on your credit score. Always get written confirmation from both lenders before you stop any existing payments.

Refinance for a Lower Car Payment

So there you have it! If you follow these 5 tips, you’ll be sure that when you refinance, you’ll get a deal for a lower car payment.

Timing is crucial. You want to make sure that you only refinance an auto loan when it’s right for your financial situation.

If you found this article useful, check out our other blog posts. At dailycarblog.com we have tips and tricks for all your auto needs.