Choosing a good auto refinance company is not complicated when you know what factors to consider. Here are some of them.
Types of Lenders
Various platforms such as credit unions, banks, and online refinance companies have different lending criteria. Credit unions, for example, have a membership fee, and only members are eligible for refinance. But their lending rates are low. Find out what the lending criteria are for different lenders before you choose one.
The Annual Percentage Rate
This is an important piece of information you would require from a lender. The US Prime Rate is often the basis for Annual Percentage Rate or APR. Many large banks charge it as an interest to the customers who have good credit scores. If you have a good credit score, your APR should be close to the Prime Rate. A poor credit score may also get you a subprime loan. However, you must assess refinance networks to find which lenders are offering such loans.
Terms of the Loan
This is an important question you will need to consider when choosing an auto refinance company. There are generally two types of terms when it comes to taking a loan:
- Short term: With this type of loan, you can pay more every month after refinancing and end up owning the car faster.
- Lower Monthly Payment: With this option, you can keep the same loan term, but the period may prolong.
In either case, ask about the terms and payment options and see which strategy suits your needs best.
Sometimes you may have to pay an early termination fee depending on your original loan contract. Additionally, you may also be charged a transaction fee when you switch lenders. There is also a registration fee you might have to pay, which is different in every state. However, even after all these costs, refinancing can help you save money through a lower interest rate.
How Will Auto Refinance Affect My Auto Insurance?
Insurance is usually higher if you have a brand new car. However, your car's value will be reevaluated when you apply for refinancing. There is a chance you may qualify for a lower car insurance rate. Some lenders may require you to get the GAP coverage. This type of coverage covers the gap between your car's worth and what you owe on the car loan.
In the end, refinancing is not hard if you know what questions to ask. Therefore keeping all the factors mentioned above in mind would help you choose the right company.