Many Americans today are asking themselves the same question: How can I refinance my car and lower my payments? If you are unsure about your ability to continue to afford your car payments, you may want to refinance your car. The following will help you decide whether or not refinancing is for you, and what steps you must take to obtain a loan.
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Why Refinance?
When a borrower initially purchases his or her automobile, a loan is usually granted in order to cover the full cost of the car. The loan is then repaid with interest over a certain amount of time, called the life of the loan. Depending on the borrowers past credit history, income, work history, and current debt responsibilities, this interest rate will vary. Unfortunately, many borrowers in America today have been assessed an interest rate that they are no longer able to afford. Interest rates like these usually result in an upside down loan, meaning that the loan is increasingly becoming greater than the already depreciating value of the car. Applying for a car refinance loan can help solve these problems.
Refinancing Defined
When you refinance your car, you are allowing another lender to buy your loan. This means they pay the initial lending institution all necessary funds to pay off the borrowers debt. The borrower in turn repays the new lender with monthly loan payments. These payments are usually lower than those that preceded them, for the borrower agrees to entirely new loan terms. New terms will usually result in a lower interest rate and/or an extension/decrease to the life of the loan.
Refinance My Auto Loan
In order to refinance car loans, borrowers must first make sure that the amount of the loan they have yet to repay is less than or equal to the current value of the car. Most lending institutions will not approve an application of someone who owes more than the cars worth unless some kind of additional collateral is offered. If you currently owe more than the cars value, the bank may be able to offer you a smaller loan to repay a portion of the initial loan.
Automobile Refinance Process
You can get auto refinance rates online or from the bank/lender. Be sure to provide all information that may be influential in your receiving the lowest interest rate possible. This includes assets, income, and credit history.
Once you have been approved for an auto refinance loan, be prepared to pay certain fees that help the transfer process. These fees are usually only a few dollars, and include re-registration fees and lien holder fees. Once sufficient paperwork has been filed and all preliminary fees have been paid, your old loan will be bought by your new lender. The title will transfer to this new institution, and you will begin making payments on the new loan.
Bad Credit Eligibility
If you have little or insufficient credit history, you may still be eligible for auto refinance. One common misconception is that poor credit will keep you from refinancing. This is not the case. Since you have already been making payments on your initial car loan, your credit rating has already improved. This is especially true if you have been managing your payments in a timely manner. Poor credit may have an influence on the interest rate and loan term you are assessed, but most lending institutions have options for bad credit refinance loans.
Lending institutions may require that you pay extra fees in order to assist you with receiving a bad credit auto loan. If possible, it is wise to have some other sort of collateral that you can offer as security.