Posts Tagged car refinance

Who Qualifies for Auto Refinancing?

Who qualifies for auto refinancing?In today’s economic climate, experts are constantly pushing for people to save money. Recent estimates are that to be financially viable a person should have at least three months’ worth of bills saved up. This can be problematic for those living paycheck-to-paycheck. In order to get more financially stable, many are turning towards refinancing their home and auto loans to try and save money. The question is who qualifies for auto refinancing?

Simple and Clear

The process of refinancing a car is much easier than that of refinancing a mortgage. The qualification criteria are more straightforward and there is less paperwork, time and cost throughout the process. The catch is that credit becomes an important factor.

Interest Rates

Pay attention to current interest rates. If the rate you are currently paying is much higher than the current standard rate, you may want to look at refinancing. For example, between 2008 and 2013 interest rates dropped by nearly 2.5%, a significant decrease. If you are paying 7% or higher on your current auto loan, now might be a good time to consider trying to lower those monthly payments.

Credit Score

Credit is all-important when it comes to auto loans. Still, the criteria for applying are far less than those for home loans. If your financial situation has improved over the past few years, and you are maintaining a strong payment history, you might be surprised at just how qualified you are for a new and lower interest rate on your loan.

How Long Is Your Loan?

The length of your loan is another factor you should take into account. If your loan is very long—up to eight years—it may be time to look into re-investing. A shorter loan at a lower rate may involve equivalent or slightly higher payments, but you will pay off your vehicle faster. If you can afford to do so, you might be able to save more money faster after all is said and done.

With a long loan you will pay much more in interest because of the long term. They key factor here is that it is not always about your monthly payment. Sometimes, removing the debt faster is a more ideal situation.

Things to Avoid

As attractive as refinancing may be, there are certain situations in which you should avoid doing so. If the existing finance deal includes a penalty for early payment, or there are fees that offset any savings you would gain, refinancing may be a bad idea.

Likewise, understand that refinancing can extend the life of your loan. If you are trying to reduce your repayment term, a refinance can sometimes be a bad deal. You are essentially taking out a new loan to pay off the old. Make sure that your new loan term will reduce the money you spend overall, not increase it.

If you think that refinancing your auto loan would be a good step for you, we are happy to discuss the possibility. Give us a call today 800-258-3759; we are here to help!

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