Automobile Refinance

Automobile Refinance - Whenever the federal government lowers the prime lending rate, a surge of home loan refinances is sure to follow.

While most people are aware of the positive impact a lower interest rate can have on their mortgages, many don't think about using the opportunity to refinance their auto loan as well. In fact, auto loan refinancing is one of the best-kept money saving secrets.

Automobile refinancing and home refinancing are fundamentally the same. In both cases, you're paying off the original loan with a new, lower interest loan. A lower interest rate means a lower monthly payment, and if you diligently apply the difference towards your new loan, you'll pay your car off even sooner.

To refinance a car loan, follow these simple steps:

Contact lending institutions by phone or online to inquire about auto refinance opportunities. (Tip: It's not likely that you'll be able to refinance through the same lender used for your original car loan. If you're already paying a higher rate, they're not likely to lower it, as this wouldn't be in their best interests.) Be sure to ask about the interest rate, term length, associated fees, and whether there are any restrictions.

Most ending institutions will not refinance automobiles that:

• Have an excess of 75,000 miles



• Are commercial vehicles and/or are used for business



• Do not meet loan-to-value requirements (visit Edmunds.com or KBB.com to receive an approximation of your vehicle's value)



• Have a balance of less than $7,500

After choosing a lender, the auto refinance process is quite simple:

1. Contact your existing lender to find out the payoff amount for your current loan

2. Complete a refinance application

3. After approval, you'll receive a check for the payoff amount to be sent to your current lender

As with all loans, your credit score impacts the interest rate you'll receive. If your credit score is above 680, your chances of securing a low APR loan are quite good; below 680, and you'll pay a much higher rate; if your score is less than 540, it's likely that you won't qualify at all.

For a better understanding of how a lower interest rate can impact your monthly payments or shorten the length of your loan, use an online automobile refinance calculator. While even a 1% reduction yields significant savings over time, rock-bottom rates will produce even more dramatic results, so be sure to do your due diligence in maintaining a good credit score before you refinance.


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