If you own a car and wish to have your interest rate revised, or regret your financing decisions, now is the time to think about refinancing. But jumping into a new loan agreement without doing your research will leave you exactly where you started. Before thinking of a new car loan, consider the following questions.
Does a car refinance hurt my credit?
If your credit score was low while taking out the original loan, you must determine if it has improved ever since. However, if it’s still too low to qualify for a car refinance, then it’s better to wait it out instead of getting an interest rate that’s only slightly better than your existing one.
How do I search for the best interest rate?
When it comes to interest rates, never settle on the first one you find. Take the time to go through different credit websites and do your research on different banks to compare their rates. Don’t forget to speak to your current lender, as it may be easier to transition from one loan to another if you decide on a refinance with them.
It is important to understand that a shorter refinanced loan with the same monthly payment could save you money compared to a lengthier loan with lower payments. This is because a majority of those payments include interest.
How soon should I go for a car refinance loan?
If it has only been a few months since you got your existing loan, it may hurt your credit score. Moreover, it doesn’t let you see if the loan works within your budget. However, if you refinance too late, you might not have enough savings worth your time and money.
How do LTVs affect my loan?
Your car’s value is always depreciating. There is a chance that it might lose up to 25% of its total value in the first five years. Most consumers don’t take the loan-to-value (LTV) ratio into consideration and assume that nothing would affect its value since the car is new. Factors such as age, mileage and wear and tear, etc., can put your car’s value down even if it has just been purchased. Your new loan terms may reflect the depreciated condition of your car.
On the whole, there are many more questions to ask about a car refinance, and borrowers must do their research ahead of time for their potential lenders.